US SEC Bitcoin ETFs concerns hinder approval process

US SEC Bitcoin ETFs concerns hinder approval process and the authority writes a letter to two US trade groups in order to explore the potential issues ahead of Bitcoin ETFs introduction.

19 January, AtoZForex The US Securities and Exchange Commission (SEC) has signaled that it has no plans to approve cryptocurrency exchange-traded funds until all the turmoil around investors’ protection is settled.

US SEC Bitcoin ETFs concerns hinder approval process

The Director of Investment Management at the SEC, Dalia Blass, has written a letter to two US trade groups, stating:

“We believe … that there are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors.”

ETFs are the investment funds that track certain securities traded on an exchange. In fact, investors have been pretty excited about the launch of Bitcoin ETFs following the introduction of Bitcoin futures by the CME and CBOE at the end of 2017.

SEC Bitcoin ETFs Concerns

There are two key issues that have been raised by the regulator. First one comes are the extreme volatility of the cryptocurrency market, while the other one is the concern over funds’ liquidity with these products. Bitcoin ETFs would require daily valuations and liquidity. This could be tested by digital currency assets.

The letter from Dalia Blass further poses a question:

“Would funds have the information necessary to adequately value cryptocurrencies or cryptocurrency-related products, given their volatility, the fragmentation and general lack of regulation of underlying cryptocurrency markets, and the nascent state and current trading volume in the cryptocurrency futures markets?”.

Another section of the letter asks:

“How would funds take into account the trading history, price volatility and trading volume of cryptocurrency futures contracts, and would funds be able to conduct a meaningful market depth analysis in light of these factors?”

The US SEC has concluded the letter stating that “until the questions identified above can be addressed satisfactorily”, the agency will not believe in the appropriateness for fund sponsors to register funds that intend to invest substantially in cryptocurrency market.

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