According to a person familiar with the issue, the Securities and Exchange Commission has directed at least one asset manager to abandon plans to launch a leveraged bitcoin exchange-traded fund, according to the source.
According to the source, the SEC wants to restrict the introduction of new bitcoin-related products to those that provide unleveraged exposure to bitcoin futures contracts, such as the ProShares Bitcoin Strategy ETF BITO, which is down 4.99 percent this morning.
The decision is the latest setback for asset managers who are attempting to capitalise on investor interest in cryptocurrencies by offering new products to the market. In an effort to safeguard investors against offerings that they feel may be prone to fraud, manipulation, or other risks, regulators have placed restrictions on product launches.
In the late afternoon of the same day, Direxion submitted proposals for an exchange-traded fund (ETF) with the purpose of enabling investors to basically trade against the bitcoin futures contracts used by the ProShares ETF. A request for comment from Direxion did not receive a response.
According to Valkyrie Investments, a fund that would utilise 1.25 times leverage, or borrowed money, to improve the daily returns of a portfolio of bitcoin derivatives such as futures contracts and options will be established on Tuesday, March 20. As previously reported by a source familiar with the discussions, Valkyrie was asked to retract its proposal. As of Wednesday afternoon, Valkyrie’s submission had not been removed from the system.