Securities Lawyer Says Confusion Between ETN & ETF Led to SEC’s Suspension of Bitcoin Tracker One
Back on September 9, the U.S. Securities and Exchange Commission (SEC) decided to suspend trading of Bitcoin Tracker One (CXBTF) and Ether Tracker One (CTHF). According to the official report, the decision has been taken because of ‘confusion amongst market participants regarding these instruments.’
The announcement was made by the @SEC_News twitter account in which they informed the suspension of the Bitcoin Tracker One and Ether Tracker One ETNs.
It seems that the company did not explain the difference between ETNs and Exchange Traded Funds (ETFs). Some investors did not have the correct information, something that pushed them to take bad decisions.
The SEC informed on the matter:
“The Commission temporarily suspended trading in the securities CXBTF and CETHF because of confusion amongst market participants regarding these instruments. This order was entered pursuant to Section 12(k( of the Securities Exchange Act of 1934 (Exchange Act).”
An enforcement defense and securities litigation attorney that works at Kobre Kim LLP, Jake Chervinsky, explained that the SEC’s suspension of these ETN has no relation with the overall crypto regulatory environment in the United States.
He said that the CXBTF and CETHF failed to properly inform about their ETNs. Some investors believed that they were investing in ETFs, but instead, they were putting their funds in ETNs.
Mr. Chervinsky comments that the problem is related to both the CXBTF and the CETHF and not with Bitcoin (BTC) and Ether (ETH). Additionally, the SEC says that there is a lack of current, consistent and accurate information about these products.
One of the main differences between ETNs and ETFs is related to ownership. When an investor enters the cryptocurrency market through an ETF, it is possible to receive the digital asset from the ETF provider.
ETNs are structured product issued as senior debt notes. Moreover, ETNs do not have the same degree of security and insurance as ETFs.
Because of this reason, the SEC wanted to ensure that both products are differentiated from each other. In this way, investors would not be misinformed about the investment tools that they are using.