Risk & Compliance

SEC Halts Trading in Bitcoin Tracking Products

The SEC's move highlights its "strict stance against letting ETFs tracking bitcoin and other cryptocurrencies come to market."
Matthew HellerSeptember 10, 2018

In another move that highlights U.S. regulators’ concerns over Bitcoin exchange-traded funds, the U.S. Securities and Exchange Commission has suspended trading in two investment products that track cryptocurrencies.

Bitcoin Tracker One and Ether Tracker One were launched in U.S. public markets last month after trading on the Nasdaq Stockholm exchange for three years. They have been trading “over the counter” in transactions that occur off exchanges within the U.S.

But the SEC halted trading in the products on Sunday, citing “confusion amongst market participants regarding these financial instruments.”

The commission noted that broker-dealer application materials describe the products as “exchange-traded funds,” but other public sources call them “exchange-traded notes” and the issuer — a Swedish-based subsidiary of the U.K. firm CoinShares Holdings — describes them in offering materials as “non-equity linked certificates.”

“The public interest and the protection of investors require a suspension of trading in the securities,” the SEC said in imposing a trading halt that will continue until Sept. 20.

As Reuters reports, the SEC “has taken a strict stance against letting ETFs tracking bitcoin and other cryptocurrencies come to market,” reflecting concerns that the bitcoin market is too loosely structured and lacks protections against fraud and manipulation to merit an exchange traded fund or product.

Among other previous actions, the commission in July rejected another effort by entrepreneurs Cameron and Tyler Winklevoss to list a bitcoin-related exchange-traded fund and last month denied proposals for nine ETF filings filed by three companies.

The Winklevosses had argued that bitcoin and bitcoin markets are inherently resistant to manipulation.

According to CoinDesk, the Bitcoin Tracker One and Ether Tracker One “were contrasted with more sophisticated exchange-traded fund products which had recently been shot down by regulators and [were] described as a more immediate way to access crypto exposure with dollars.”

Cryptocurrency ETFs have been touted as a vehicle for increasing institutional participation in the crypto space but some analysts now believe there may be only a slim chance of the SEC approving a Bitcoin ETF product before 2019.