Questions from the SEC on proposed cryptocurrency financial products

On Thursday, two prominent trade groups received a letter from the SEC demanding responses on cryptocurrency investment funds.

On January 18, 2018, Dalia Blass, director of the Investment Management Division of the US Securities and Exchange Commission. UU, issued a letter addressed to the directors of two business groups: The Investment Company Institute and the Securities Industry and Financial Markets Association.

The letter demands answers to no less than 31 questions about how mutual funds or exchange-traded funds (ETF) based on Bitcoin and other "related assets" - probably other financial products backed by crypto - have a price and are safeguarded .

The SEC also requested information from commercial groups (representing securities firms, banks and asset management companies) about whether investors really understand the risks and concerns surrounding allegations that cryptocurrency markets could be manipulated by bad actors.

After providing basic information and raising a series of questions regarding valuation, liquidity, custody, ETF arbitrage and the potential for market manipulation, the SEC clearly stated:

"Until the questions identified above can be satisfactorily addressed, we do not believe it is appropriate for fund sponsors to initiate registration of funds if they intend to invest substantially in cryptocurrencies and related products. In addition, we have requested that they have registration statements submitted for such products and thus be able to withdraw them. "

The SEC's comments on cryptographic-backed financial products, such as bitcoin ETFs, which are potentially traded on fixed markets, align with previous positions adopted by the SEC and chair Jay Clayton in response to symbolic offers.

It seems that traditional financial players are so in a hurry to capitalize on the cryptocurrency craze, that they saw the price of Bitcoin rise 1,500% last year, and now they are falling victim to the same "FOMO" that drove the madness of the 2017 offer.

It is very likely that the commission's questions require other entities to seek to include financial products backed by cryptography to address their concerns on a case-by-case basis.

Today, the agency issued a joint statement with the CFTC on its concerns about the cryptocurrency markets. In February, the agencies will testify before the Senate Banking Committee on cryptocurrency regulation.