The US Securities and Exchange Commission (SEC) has blocked the way to approving several exchange traded funds (ETFs) whose assets include bitcoin and other cryptocurrencies. The regulators believe such financial products do not conform to rules, aimed at protecting ordinary investors.
The SEC explained its motives in a letter to two Wall Street trade groups, whose intent was to launch blockchain ETFs. The regulators do not see how bitcoin’s volatility and potential liquidity will allow the funds to follow the rules, according to which they must calculate the fair market value of the equity at the end of each trading day and provide investors with an opportunity to sell their shares.
“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,” wrote Dalia Blass, the SEC’s director of investment management, in the letter.
The Commission also warned executives not to seek loopholes for launching crypto funds. As of now, the law lets licensed companies managing ETFs and mutual funds set new funds with almost no SEC control. Blass added that they would remain sceptical to any such move and would take measures to protect mom-and-pop investors.