The US Securities and Exchange Commission (SEC) has observed increasing interest for exchange-traded funds (ETFs) that hold value in various cryptocurrencies. However, the regulator has warned that there are “significant” issues regarding investor protection that must be examined before such funds are made available to retail investors.
In a letter, Dalia Blass, the the SEC’s investment management division director, requested for answers to some questions regarding bitcoin, such as how the funds would develop procedures to value bitcoin with the cryptocurrency’s “seesawing” price, what steps the funds would take to assure that they have sufficient liquid assets, and how to address the concerns that bitcoin markets could easily be manipulated.
Blass wrote in the letter: “Until the questions identified above can be addressed satisfactorily, we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products, and we have asked sponsors that have registration statements filed for such products to withdraw them.”
The price of bitcoin rose well over 1,000 percent in 2017, and according to Coindesk, some recent filings have been made to the SEC for ETFs that are cryptocurrency-related.
Last year, the SEC rejected a bitcoin ETF that was founded by Tyler and Cameron and Winklevoss (the twins who are known for their role in founding Facebook), saying that it was a fraud risk and that there was a lack of regulation in the bitcoin markets of the world.
This week, Bitcoin had a major sell-off over concerns regarding a major regulatory crackdown in South Korea.
Today, Reuters reported that officials from China were also targeting cryptocurrencies with an aim to clamp down on online pyramid schemes.
Bitcoin was trading up by over four percent at $11,733 before lunchtime today.