SEC Suspends Bitcoin and Ethereum Exchange-Traded Notes

September 09, 2018

The U.S. Securities and Exchange Commission has suspended the trading of Bitcoin Tracker One and Ether Tracker One, exchange-traded notes issued by XBT Provider AB, a subsidiary of CoinShares Holdings. The temporary suspension was issued by the US regulator on Sunday.

The Securities and Exchange Commission announced the temporary suspension of trading in the securities Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) commencing at 5:30 pm EDT Sept. 9, 2018 and terminating at 11:59 pm EDT Sept. 20, 2018. https://t.co/5z1vEYFBFB

— U.S. Securities and Exchange Commission (@SECGov) September 9, 2018

According to the official order, the SEC identified inconsistent language used to describe the products, known as Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF), which are issued by Stockholm-based XBT Provider AB.

“For example, the broker-dealer application materials submitted to enable the offer and sale of these financial products in the United States, as well as certain trading websites, characterize them as “Exchange Traded Funds.” Other public sources characterize the instruments as “Exchange Traded Notes.” By contrast, the issuer characterizes them in its offering materials as ‘non-equity linked certificates.'”

Prior to being made available in the US last month, CXBTF and CETHF were listed and regulated in Sweden. The notes started trading on the Nasdaq Stockholm exchange in 2015.

Similar to exchange-traded funds (ETFs), the exchange-traded notes (ETNs) offered investors exposure to Bitcoin and Ethereum. ETNs are technically different from ETHs. The former are unsecured. These structured products are issued as senior debt notes. By contrast, ETFs represent a stake in an underlying commodity, providing investments into a fund that holds the assets it tracks.

Last month, Ryan Radloff, the chief executive officer of CoinShares Holdings Ltd., the parent of XBT Provider AB 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.”

In addition to suspending the ETNs, the SEC has rejected several ETF proposals, despite a dissenting decision by Commissioner Hester Peirce. Those rejections are being reviewed.

Although an SEC-regulated ETF has been characterized as the type of impetus the cryptocurrency markets would need to lure big Wall Street money, some analysts argue that Wall Street would only further the financialization of Bitcoin, exposing it to the derivatives market that could undermine the economic fundamentals of the cryptocurrency’s limited supply.

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