SEC expresses ETF skepticism

ETFs

So, what’s new? The SEC has hinted that the market volatility of Bitcoin may mean that the digital asset may not yet be ready to support an exchange traded fund.

The US Securities and Exchange Commission expressed these views in a staff statement recently that was published by the Division of Investment Management. That said, the regulator has said that it is monitoring the digital asset sector and is seeking input.

The note warned investors in mutual funds that Bitcoin is highly speculative, and that they may be taking on more risks by trading Bitcoin futures than they realize.

And while the note is aimed at investors in mutual funds, it has implications for Bitcoin EFTs, which is something that crypto proponents have been hoping to see for years.

It explains:

“The staff, among other things, expect to … consider whether, in light of the experience of mutual funds investing in the bitcoin futures market, the bitcoin futures market could accommodate ETFs, which, unlike mutual funds, cannot prevent additional investor assets from coming into the ETF if the ETF becomes too large or dominant in the market, or if the liquidity in the market starts to wane.”

And, well, here we are a week later with BTC prices down to almost half of their all-time high.

The warning came as there was increased optimism that the first Bitcoin ETF may be nearing approval in the United States, following the appointment of a new SEC chairman with a deep history in blockchain and cryptocurrencies.

And it arrived right as high-profile funds from Morgan Stanley and BlackRock began to diversify into Bitcoin via adjacent products like cash-settled Bitcoin futures. These are major steps in the institutional adoption trend of the original cryptocurrency.

The SEC is currently reviewing 4 crypto ETF proposals currently, and the agency has a total of 10 sitting before it.

And from the looks of things, they might be there for quite some time yet.


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