The US Securities and Exchange Commission (SEC) made it clear that it does not intend to approve the registration of Bitcoin and cryptocurrency-based exchange-traded funds (ETFs), questioning the possibility of fitting such products into the rules designed to protect ordinary investors, writes The Wall Street Journal.
The letter sent by the SEC to Wall Street business groups seeking to launch cryptocurrency-based ETFs and mutual funds raises the question of how the volatility and liquidity problems of Bitcoins would be reconciled with the need to calculate the fair value of funds’ portfolios at the end of each trading session.
The problem can also be the easy fund withdrawal by investors from such investment structures, the SEC said.
“Unless these issues are resolved satisfactorily, we do not consider it expedient to register funds that plan to invest primarily in cryptocurrencies and related products,” said Dalia Blass, who is responsible for investment management at the SEC.
A number of investment companies have previously stated their desire to launch Bitcoin ETFs amid growing interest in the cryptocurrency market, but the SEC has always been skeptical about this idea.
The regulator also expressed doubts about the initial coin offerings (ICOs), considering that many of these transactions are similar in structure to the sale of securities and must comply with the rules for protecting investors.
Last year, the SEC rejected the application of Cameron and Tyler Winklevoss brothers, the founders of crypto exchange Gemini Trust, to create two Bitcoin ETFs, saying the global cryptocurrency market was not transparent enough.
Some experts hoped that the SEC would soften its position after the launch of the Bitcoin futures by the CME and CBOE. In December 2017, the Commodity Futures Trading Commission (CFTC) authorized Chicago-based CBOE and CME to launch Bitcoin futures.
The SEC says in its letter that it will monitor any company trying to find loopholes for launching crypto-related ETFs. The regulator said that its priority was to protect ordinary investors.