The wait for trading a Bitcoin-based exchange-traded funds (ETF) has just gotten longer, as even the much touted, alternative, overseas-listed instruments, called the Bitcoin Tracker One (CXBTF) and the Ether Tracker One (CETHF), have been suspended from trading by the U.S. Securities and Exchange Commission (SEC).
Ambiguity around Product Classification and Concerns for Investor Protection
In the order issued on Sunday, September 9, 2018, the financial watchdog of the U.S. announced the suspension of trading activities for the U.S. investors in the two securities. The suspension will be effective from 5:30 p.m. EDT on September 9, and will last through 11:59 p.m. EDT on September 20.
Highlighting the ambiguity around the classification of these foreign-listed securities, the agency says that these securities are being characterized as 'Exchange Traded Funds' in the “broker-dealer application materials submitted to enable the offer and sale of these financial products in the U.S.,” as 'Exchange Traded Notes (ETN)' in other public sources, and as 'non-equity linked certificates' by the issuer in its offering material. The SEC order goes on to say that the decision was for “protection of investors” and in “public interest.”
Issued by XBT Provider AB, a Swedish-based subsidiary of the U.K. firm CoinShares Holdings, these instruments have been trading on the Nasdaq Stockholm exchange in Sweden since 2015 in the native currencies of euro and Swedish krona. They have started quoting in U.S. dollars (USD) since mid-August this year. (See also, Bitcoin Tracker One: The Bitcoin ETF Alternative.)
Ryan Radloff, CEO of CoinShares Holdings Ltd., the parent of the company that is offering the ETN, had then said, “Everyone that’s investing in dollars can now get exposure to these products, whereas before, they were only available in euros or Swedish krona. Given the current climate on the regulatory front in the U.S., this is a big win for Bitcoin.”
As the SEC has been rejecting multiple applications for Bitcoin-based ETF in the U.S. for a long time — the most recent refusal coming around late August – the Bitcoin Tracker One and Ether Tracker One were being looked upon by the U.S.-based cryptocurrency proponents as the legal alternative to the crypto ETFs. (For more, see SEC Again Rejects a Slew of Bitcoin ETFs.)
The suspension order by SEC is being attributed to the recent decline in bitcoin and ether valuations observed over the weekend. Bitcoin has lost around 1.4 percent while Ethereum is down 4.34 percent over the last 24-hour period as of writing. Bitcoin was trading at $6,332 during Monday morning ET hours, while Ethereum was quoting at $195.75, according to CoinMarketCap.com.
Investing in cryptocurrencies and 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 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 no cryptocurrencies.