SEC pulls two crypto trading products over market confusion

The Securities and Exchange Commission (SEC) announced yesterday that it has temporarily suspended two cryptocurrency-based trading products.  The products, Bitcoin Tracker One (BTO) and Ether Tracker One (ETO), are being reviewed by the commission to determine if they need to be classified as exchange-traded funds (ETF) and are suspended until September 20 at the earliest. 

BTO and ETO track the price of their respective cryptocurrencies.  They are listed on the Stockholm NASDAQ exchange, but can be traded over the counter in transactions that take place off exchanges in the US.  In announcing the suspension, the SEC said, “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 ‘[ETFs].’”

ETF proposals have been routinely denied by the SEC, as the commission claims that they are prone to greater manipulation.  This assertion has yet to be confirmed, and there have been a number of "traditional financial" instruments that, even today, have been allowed despite the possibility of manipulation.  Last week, the SEC charged billionaire Phillip Frost, founder of the OPKO Health pharmaceutical company, of perpetuating fraud of over $27 million through a pump-and-dump scheme.

Recent crypto-based ETF denials by the SEC have helped shave off a significant portion of the cryptocurrency markets as investor confidence waned.  There is, however, a small glimmer of hope that could come at the end of this month.  The SEC has announced that it would issue a decision on the VanEck crypto ETF by September 30 at the earliest.  Additionally, after denying nine proposals at the end of August, the commission immediately issued a retraction, stating that it would review the proposals further.  While there is still no guarantee that the ETFs will be approved, the reversal of position could be a positive indicator that the financial regulator is having a change of heart. 

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