May 12, 2021 / Business

SEC Reveals On The Problems Of Bitcoin Futures And Risks of Crypto ETFs


Regulator believes that the high level of volatility of the cryptocurrency retains its status as a highly speculative asset.

US Securities and Exchange Commission (SEC) has warned investors about the risks of investing in bitcoin futures. According to the officials, market participants should reconsider their decisions about working with crypto derivatives. Representatives of the SEC shared this point of view in their next statement.

What’s Wrong With Bitcoin Derivatives

Regulator believes that mutual fund investors who have access to investing in crypto futures based on the most capitalized cryptocurrency, Bitcoin, may face a number of risks.

The officials explained their point of view by the fact that despite the increased popularity of BTC, it is still, in their opinion, a highly speculative asset. Accordingly, derivatives built on its basis may carry risks.

Commissioners believe bitcoin’s high level of volatility also poses a threat to investors. At the same time, the already adopted regulatory measures, in their opinion, are not enough to protect market participants from the possible negative consequences of investing in crypto derivatives based on BTC.

SEC urged investors to once again weigh the risks of investing in such financial instruments and carefully study the information they are provided with in mutual funds.

“Investors should focus on the level of risk they are taking on, and the level of risk they are comfortable taking on, prior to making an investment.” – this is how the SEC commented on the desire to protect market participants from the possible consequences of rash investment decisions.

Bitcoin ETF Reference

The publication of Commission’s doubts about the safety of bitcoin futures followed the statement of the new head of the department – Gary Gensler – about the need to improve the conditions for protecting investors. In his opinion, this approach can positively affect the development of the digital asset market.

Bloomberg noted that such statements by the new head of the SEC were taken by many members of the crypto community as a hint that the change in the leadership of the regulator will not speed up the approval of the bitcoin-ETF in the United States.

Recall that Gary Gensler’s predecessor, Jay Clayton, considered exchange-traded funds based on cryptocurrencies to be insufficiently secure financial instruments. Against the background of his position, the Commission had previously rejected all applications for launching a bitcoin-ETF. With the change in the head of the SEC, many market participants have resumed the race for the right to issue the first exchange-traded fund based on BTC.

Gary Gensler’s desire to improve the conditions for protecting investors may be a reason for refusing to launch a potentially dangerous financial instrument. The likelihood of a repetition of the scenario is indicated by the fact that market participants, as well as during the SEC rule by Jay Clayton, began to face the postponement of decision deadlines on their applications for the launch of bitcoin-ETF.

According to the publication, representatives of the regulator plan to assess the risks of issuing permits for the issuance of cryptocurrency-based funds traded on the exchange, taking into account the analysis of potential threats faced by investors of mutual funds storing assets in crypto futures. As such, the SEC’s negative attitude towards crypto derivatives could negatively impact the decisions of the Crypto ETF Commission.

Recall that while in the US regulators are only discussing the risks of launching a crypto ETF, that time in Canada, investors have already gained access to exchange-traded funds based on Bitcoin and Ethereum.

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