US securities regulator issues warning on BTC futures-exposed mutual funds

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The U.S. Securities and Exchange Commission (SEC) has warned investors to be aware of the risks of digital currency futures in mutual funds, in its latest investor warning over digital currencies.

The regulator, which is tasked with overseeing the securities markets in the U.S., said investors should thoroughly weigh up the risks of investing in any mutual funds exposed to the BTC futures market, which it described as “highly speculative investment.”

Noting in particular the volatility of BTC and BTC futures, the SEC said the lack of regulation made the market a hotbed for fraud and manipulation, further complicating the risk picture for investors.

Pointing to the need to consider the risk disclosures of any exposed funds fully, the SEC said it was up to investors to focus on the risks they are taking.

“As with any fund investment, investors should focus on the level of risk they are taking on, and the level of risk they are comfortable taking on, prior to making an investment.”

The SEC notice picks up on the expansion of digital currency futures markets since the first was launched for Segwit back in late 2017, with these speculative investments now forming an increasing share of some mutual funds targeting investors.

The commission said it would continue to monitor compliance at funds exposed to digital currency futures, in line with the Investment Company Act and federal securities laws.

“Investor protection and assessing the ongoing compliance of these funds is a top priority for the staff.”

The SEC has also suggested it will give further consideration to whether the risks of digital currency futures could be better accommodated through an ETF, or exchange traded fund. Distinct from mutual funds, the SEC said ETFs “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.”

The notice is only the latest in a series of warnings issued by the SEC to investors considering highly risky digital currency investments.

See also: SEC Commissioner Hester Peirce discusses “Blockchain Policy Matters” with Bitcoin Association’s Jimmy Nguyen