At the beginning of this year, the U.S. Securities and Exchange Commission (SEC) sent a letter to Paul Stevens and Timothy Cameron, heads of investment companies with an interest in cryptocurrencies. The letter was written to provide some insight into the SEC’s position on cryptocurrencies, as well as to solicit feedback on the subject. The publication of the letter prompted the president of the investment firm Cboe Global Markets, Chris Concannon, to make an appeal to the SEC to not get involved with the development of a Bitcoin exchange traded fund (ETF).
Concannon’s letter expressed his belief that the SEC needed to maintain a hands-off approach because the Bitcoin ETF functions similarly to other commodity-based ETFs. In the letter, Concannon explained, “As the volumes continue to grow, especially on regulated U.S. markets, the overall spot Bitcoin market looks more and more like a traditional commodity market and CBOE continues to believe that the spot market is sufficiently liquid to support a Bitcoin ETP.”
The five-page letter by the SEC stated, “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.” It then went on to ask for feedback on a list of questions before adding, “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.”
An ETF is an exchange-traded product that acts like a marketable security. It tracks indices, commodities and bonds the same way that an index fund does. They are also traded like common stock on an exchange and usually have higher liquidity and lower fees than do mutual funds.
Whether or not the SEC will respect the request remains to be seen. However, the agency is starting to take a hard look at all cryptocurrency-related activity. It is currently investigating a number of companies and has issued subpoenas to those entities it feels are trying to circumvent securities regulations in the country. Since the SEC was awarded an increased budget by U.S. President Donald Trump, receiving 3% more than it had asked for, there’s a good chance that more fallout will be seen down the road.
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