The US Securities and Exchange Commission (SEC) has seen growing interest for exchange-traded funds (ETFs) that hold value in cryptocurrencies, but the regulator has warned it there are "significant" investor protection issues that need to be looked at before such funds are offered to retail investors.
In a letter, the SEC's investment management division director, Dalia Blass, asked for answers to a number of questions about bitcoin, such as how funds would develop procedures to value bitcoin with its seesawing price, what steps funds would take to assure they have sufficiently liquid assets, and how to address concerns that bitcoin markets could be manipulated.
Blass wrote:
Until the questions identified above can be addressed satisfactorily, we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products, and we have asked sponsors that have registration statements filed for such products to withdraw them.
The price of bitcoin soared well over 1,000 per cent last year, and according to Coindesk a number of recent filings have been made to the SEC for cryptocurrency-related ETFs.
The SEC last year rejected a bitcoin ETF founded by Cameron and Tyler Winklevoss (the twins known for their role in founding Facebook), saying it was a fraud risk and that there was a lack of regulation in the world's bitcoin markets.
Regulatory crackdown
Bitcoin had a major sell-off this week over concerns of a major regulatory crackdown in South Korea.
Today, Reuters reported that Chinese officials were targeting cryptocurrencies with a plan to clamp down on online pyramid schemes.
Bitcoin was trading up more than four per cent at $11,733 at the time of writing.
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