U.S Authorities to Thoroughly Evaluate Bitcoin Market’s ETF Readiness

The United States Securities and Exchange Commission (SEC) Division of Investment Management (IM) has urged investors interested in investing in mutual funds with exposure to the Bitcoin futures market, to do so with utmost caution. The division has also made it clear that it still needs to thoroughly evaluate whether the bitcoin futures ecosystem is ripe enough to accommodate an exchange-traded fund (ETF), according to a statement on May 11, 2021.

IM Warns Bitcoin Futures Investors 

The U.S. Securities and Exchange Commission’s Division of Investment Management (IM) staff has reminded investors that bitcoin (BTC) is a highly speculative asset, and as such anyone interested in pumping their money into bitcoin futures-linked mutual funds must do so with utmost caution.

IM has advised investors to take several factors into consideration before investing in a bitcoin fund, including thorough consideration of the fund’s risk disclosure, the investor’s own risk appetite, and the possibility of a total loss of funds. 

IM wrote:

“Investors should understand that bitcoin, including gaining exposure through the bitcoin futures market, is a highly speculative investment. As such, investors should consider the volatility of bitcoin and the bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying bitcoin market.”

Uncertainties Trail U.S. Bitcoin ETF Launch 

At a time when institutional investors such as Morgan Stanley, Citibank, BNY Mellon, and a host of others are making in-roads into the cryptocurrency ecosystem, IM staff has stated categorically that it will thoroughly point its searchlight into mutual funds investing in bitcoin futures, to ascertain whether they operate in compliance with Investment Company Act, as well as existing federal securities laws. 

“In addition, IM staff, in coordination with staff from the Division of Economic and Risk Analysis and Division of Examinations, will closely monitor the impact of mutual funds’ investments in Bitcoin futures on investor protection, capital formation, and the fairness and efficiency of markets.,” it added.

Presently, there are about 12 bitcoin ETF filings on the SEC’s table, with the agency currently evaluating only three of them. 

While experts and crypto proponents remain hopeful that the administration of new SEC Chair, Gary Gensler will usher in amenable regulations into the industry, IM has made it clear that it still needs to thoroughly evaluate whether the bitcoin futures market is strong enough to accommodate an ETF, before one is approved in the U.S.