The U.S. Securities and Exchange Commission (SEC) turned down plans from two different organizations aiming to set up exchange-traded funds for bitcoin and a variety of other digital currencies, according to Fortune. This move effectively kills the idea of a cryptocurrency ETF, at least for the time being.

The news came in a letter by the director of the SEC's investment management division, Dalia Blass (pictured). The letter, which was addressed to the Investment Company Institute and the Securities Industry and Financial Markets Association, indicated that the SEC feels there are simply too many unknowns about digital currencies to allow for cryptocurrency exchange-traded funds.

The risks to investors would potentially be too high, the SEC warned.

SEC's Dalia Blass

Above: SEC's Dalia Blass

Of the ever-expanding list of cryptocurrencies, bitcoin seems to be the most likely to break through into the mainstream investment world, as bitcoin futures have been available since mid-December 2017.

Further, a number of financial organizations have expressed interest in launching bitcoin-related exchange-traded funds. (See also: Why The Winklevoss Twins' New Bitcoin ETF Matters.)

SEC Rejected Winklevoss Bitcoin ETF Last Year

This is not the first time the SEC has blocked proposals for cryptocurrency ETFs, which would allow investors to participate in the market without actually owning digital currencies. In March, the agency denied a request by twins Tyler and Cameron Winklevoss to launch a bitcoin ETF. (See more: SEC Denies Winklevoss Bid to Launch Bitcoin ETFs in Surprise Upset.) ETFs tend to be popular because of their low management fees and the fact that they can be traded during the day, unlike mutual funds.

The latest SEC letter did not dismiss the possibility of cryptocurrency ETFs at some point in the future, however. It suggested the agency was "ready to engage in dialogue with sponsors regarding the potential development of these funds," adding that "there are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors." Some of these questions include valuation of the funds, the impact of cryptocurrency forks, and issues relating to market manipulation and liquidity.

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns cryptocurrencies.