Hopes for US crypto ETFs recede after SEC warning

Hopes for US crypto ETFs recede after SEC warning

The Securities and Exchange Commission’s recent notice cautioning investors about the risks of bitcoin futures used in mutual funds could spell trouble for crypto ETFs awaiting the regulator’s green light, analysts say.

For now, the commission’s Division of Investment Management is only comfortable with having mutual funds hold bitcoin futures, according to a warning issued last week.

The division urged investors to make sure that they fully understand bitcoin and its futures market before they invest in funds that have exposure to the “highly speculative investment”.

The SEC plans to “closely monitor” whether mutual funds that invest in bitcoin futures comply with the Investment Company Act and other federal securities law, the notice states.

The regulator appears to be particularly concerned about ETFs’ lack of capacity restrictions. “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,” the statement said.

The SEC’s warning underlined the regulator’s continued concerns about crypto, said Todd Rosenbluth, head of ETF and mutual fund