Daily Management Review

'Investor Protection Issues' Are Raised By Bitcoin Based Funds, Says U.S. SEC


01/19/2018




'Investor Protection Issues' Are Raised By Bitcoin Based Funds, Says U.S. SEC
While deliberating on the possibility of endorsement of more than a dozen proposed products that are based on cryptocurrencies, the Securities and Exchange Commission of the U.S. has sought clarification and answers from the fund industry about the concerns they had of these virtual coins, while also raising an alarm about the security and safety of investment that are related to bitcoin and similar virtual currencies.
 
A letter was sent by the U.S. SEC to two trade groups who represented fund managers who were keen on making detailed proposals for funds holding bitcoin or related assets. The letter was sent by a top division chief at the SEC and it had detailed explanations about the concerns and worries of the agency about cryptocurrencies and trading in them.
 
The method and mechanism of storing, safeguarding, and pricing of cryptocurrencies hat would be adopted by mutual funds or exchange-traded funds based on bitcoin, were the issues on which the SEC raised 31 questions – each one in detail, and asked the proposers to provide answers. The letter was sent by the SEC’s division of investment management.
 
How the concerns about the manipulation of the bitcoin market would be addressed and whether the investors understood the risks of such trading were also asked by the agency.
 
“There are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to investors,” said the letter signed by Dalia Blass, the SEC’s director of the division of investment management.
 
There has been demands from investors to products that are linked to bitcoin after the virtual currency showed an astounding 1,500 percent rise last year. And in order to open up bitcoin to the larger retail market, there are many companies that are attempting to launch exchange-traded funds in this category.
 
The owners of the Gemini bitcoin exchange - investors Cameron and Tyler Winklevoss, were denied permission in March last year by the SEC to an application to list an ETF.
 
Direct investment in bitcoin is being sought by the Winklevoss fund. On the other hand, a number of fund firms had raised their hopes after the launch of U.S.-listed bitcoin futures contracts late last year. This launch attempted to provide some sense of stability as a basis for the ETFs compared to the general y much larger but highly deregulated spot market dealing in the virtual currencies. Many of those proposals were withdrawn last week at the request of the SEC.
 
“The SEC statement is a “really big deal” by making public concerns that fund managers would have had to address on a case-by-case basis, behind the scenes,” said Jeremy Senderowicz, a lawyer who represented one proposal for a cryptocurrency product before the SEC.
 
“It shows that they’re going to have to take some time to consider the industry’s responses before they change their minds on it,” said Senderowicz, a partner at Dechert LLP.
 
“It gives a template for how to get to a yes.”
 
(Source:www.reuters.com)






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