SEC to Weigh Whether Bitcoin Futures Market could Accommodate ETFs

The agency also “strongly” advised the investors of mutual funds with Bitcoin futures to beware of risks as the crypto asset is volatile and a “highly speculative investment.”

The US Securities and Exchange Commission (SEC) is “strongly” advising the investors of mutual funds with holdings in Bitcoin futures to beware of risks.

While getting increasingly popular, these derivatives are based on a crypto asset that is “highly speculative” and volatile, trading in a lightly regulated market, said the SEC's division of investment management on Tuesday in a statement.

Investors must weigh their appetite for risk and examine the fund’s disclosures, the agency said.

“Investor protection and assessing the ongoing compliance of these funds is a top priority for the staff.”

These warnings from the SEC came a week after the new chief Gary Gensler told lawmakers that the crypto market “could benefit from greater investor protection.”

While Gensler didn’t mention Bitcoin in his testimony, on Tuesday, SEC said it would “consider whether, in light of the experience of mutual funds investing in the Bitcoin futures market, the Bitcoin futures market could accommodate ETFs.”

An ETF would mean “less volatility & higher regulated volumes,” said trader and economist Alex Kruger. Moreover, proponents of such a vehicle also say this would bring in a new wave of investors in the bitcoin market just like it did in gold, whose price never went under $400 after the first gold ETF (SPDR) was listed by NYSE in November 2004.

The agency also said staff would scrutinize the Bitcoin futures market to judge whether it “appropriately” supports mutual fund investments in the derivatives. It will also look at funds’ ability to liquidate their derivatives in the crypto asset and review funds’ valuations of holdings.

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