The Securities Exchange Commission (SEC) has suspended the trading of two Swedish crypto investment products effective immediately, citing confusion.
A failed bid to beat the system
The SEC oversaw the temporary suspension of the Bitcoin Tracker One and Ether Tracker One cryptocurrency products over what it described as confusion among traders. The confusion around the Tracker One assets was whether or not they could be interpreted by consumers as Exchange-Traded Funds (ETFs).
Recently, the SEC had rejected several Bitcoin ETF proposals (subject to appeal). Since then, several companies have tried to bypass regulation by providing cryptocurrency products as if they were conventional shares and stocks. One such strategy was the Bitcoin-based ETN, the Bitcoin Tracker One, which is currently listed on the Nasdaq Stockholm exchange under the CXBTF ticker. Given the SEC’s stance on Bitcoin ETFs, it makes sense that the two assets have been temporarily discontinued for trade in the United States.
As a response, BlackRock Inc., an investment management corporation and the largest ETF provider in the United States have requested for a standardisation of terms used to describe ETFs to avoid the confusion that currently abounds.
The SEC noted:
It appears … that there is a lack of current, consistent and accurate information. 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’.
By press time, AB SE0010296574.ST, the issuer of the Bitcoin Tracker One and Ether Tracker One have chosen not to comment on the matter.
ETNs vs ETFs
The SEC was, however, quick to clarify that during this suspension period, a broker-dealer can still get involved in activities within the U.S. for the sole purpose of helping non-broker-dealer customers liquidate owned positions of the two products in question. This also includes any series of transactions conducted in the Nasdaq Nordic exchange or by any other firm outside the U.S.
As much as ETNs are considered close cousins or ETFs, there are key, distinct differences that set them apart. While ETNs are structured products, often issued as senior debt notes, ETFs, on the other hand, represent a stake in an underlying commodity.
In respect to this move by the SEC, all eyes are now fixed on the much-discussed VanEck ETF appeal that is expected to be decided on by SEC before the end of September.