In a statement, The U.S. Securities and Exchange Commission (SEC) has warned against investment in Bitcoin (BTC) futures market and BTC. The regulatory agency emphasized that investors should be wary of the volatility of both Bitcoin and the Bitcoin futures market, as well as the lack of regulation and potential fraud or manipulation in the cryptocurrency market. The SEC’s statement comes as the agency has at least eight Bitcoin ETF applications still pending for review.
Investors Should be Aware of Bitcoin’s Volatility
In an official statement on May 11, the SEC’s Division of Investment Management warns against investment in Bitcoin futures market, saying:
“Strongly encourages any investor interested in investing in a mutual fund with exposure to the Bitcoin futures market to carefully consider the risk disclosure of the fund, the investor’s own risk tolerance, and the possibility, as with all investing, of investor loss.”
The regulatory agency emphasizes that investors should be aware of the dangers of investing in a volatile market or should be aware of their exposure, adding:
“Investors should consider the volatility of Bitcoin and the Bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying Bitcoin market.”
The SEC further stated that it will closely monitor and assess Bitcoin futures-exposed mutual funds’ compliance with the Investment Company Act and federal securities laws.
SEC Yet to Approve Bitcoin ETFs in the U.S.
The regulatory agency’s statement comes as a number of applications for Bitcoin ETFs have landed on its desk. As of last month, the SEC had at least eight Bitcoin ETF applications pending for review.
While the statement was intended for investment in mutual funds, the note also had implications for bitcoin ETFs, which the country had been waiting for one in years:
“The staff, among other things, expect to consider whether, in light of the experience of mutual funds investing in the bitcoin futures market, the bitcoin futures market could accommodate ETFs, which, unlike mutual funds, cannot prevent additional investor assets from coming into the ETF if the ETF becomes too large or dominant in the market, or if the liquidity in the market starts to wane.”
The SEC’s warning on cryptocurrencies comes just less than a week after Gary Gensler, the new SEC chairman, told a congressional committee that more investor protections are needed for the cryptocurrency market but the SEC does not yet have the authority to provide them, adding that Congress needs to give that authority to the agency.