SEC Halts CoinShares XBT Provider’s Bitcoin Exchange-Traded Product

SEC Suspends XBT Provider’s Bitcoin Exchange-Traded Products CXBTF & CETHF

Two XBT Provider products, Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF), have been suspended by the Securities and Exchange commission. The agency attributes the suspension to a “lack of current, consistent, and accurate information” that leads to “confusion amongst market participants.”

The Securities and Exchange Commission announced the temporary suspension of trading in the securities Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) commencing at 5:30 pm EDT Sept. 9, 2018 and terminating at 11:59 pm EDT Sept. 20, 2018. https://t.co/5z1vEYFBFB

— SEC_News (@SEC_News) September 9, 2018

The SEC issued the order on September 9, 2018. Both instruments are listed and traded on the Nasdaq/OMX in Stockholm and have been quoted on OTC Link operated by OTC Markets Group Inc. The SEC stated that it is “of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above quoted company.” The SEC issued the suspension under Section 12(k) of the Securities Exchange Act of 1934.

Further, the SEC discussed the products’ categorization, mentioning:

“The broker-dealer application materials submitted to enable the offer and sale of these financial products in the United States, as well as certain trading websites, characterizes them as ‘Exchange Traded Funds (ETF).’ According to the SEC, ETFs are registered investment companies offering investors a method to pool their money in an investment fund that invests in stocks, bonds, or other assets. As a result, investors receive the fund’s interest. The SEC also stated that there are other public sources that characterize the instruments as “Exchange Traded Notes (ETNs).”

Dissimilar from ETFs, the notes are unsecured debt obligations of financial institutions that trade on a securities exchange.

“ETN payment terms are linked to the performance of a reference index or benchmark, representing the ETNs investment objective.”

The SEC continued:

“ETNs are often confused with exchange-traded funds (ETFs). ETNs and ETFs are both traded on a securities exchange and can be bought and sold throughout the day, but there are important differences.”

The matter is further complicated by the SEC’s statement that “”the issuer characterizes them in its offering materials as ‘non-equity linked certificates’” and that XBT Provider does not classify as principal protection or as bearing interest.