The SEC has reportedly asked the financial company Valkyrie to withdraw its application to list a new leveraged Bitcoin ETF.
The Wall Street Journal revealed this.
SEC won’t accept leveraged Bitcoin ETFs.
This decision comes two weeks after the approval of the first Bitcoin futures ETF by Proshares and ten days after the approval of a second Bitcoin futures ETF by Valkyrie itself.
The choice follows the indications given by the president of the SEC, Gary Gensler, who had stated to consider cryptocurrencies as security and therefore not to look favorably on leveraged financial instruments directly linked to cryptocurrency.
On the other hand, the SEC has a different view on financial products linked to Bitcoin futures already listed on the CME of Chicago. The SEC thinks that cryptocurrencies are highly risky products, and since they are not yet regulated, they are subject to possible frauds and scams.
Going back to the issue of Valkyrie’s ETF, the SEC’s request is considered a courtesy done to the company. Valkyrie could wait for the commission’s decision within 75 days. But it seems implied that this response is unlikely to be in the affirmative.
There would currently be about twenty ETFs awaiting approval by the SEC, at least half of which are tied directly to the underlying Bitcoin.
The SEC’s cautious attitude towards these highly speculative funds is also due to the significant losses suffered by these financial instruments in the last two years. And it’s clear that an ETF on an extremely volatile currency like Bitcoin could have even greater risk factors for hypothetical investors.
Speaking of ETFs, SEC Chairman Gary Gensler recently said:
“This ETF can pose risks even to sophisticated investors, and can potentially create systemwide risks by operating in unanticipated ways when markets experience volatility or stress conditions.”
Simply put, ETFs (Exchange Traded Funds) are so-called passively managed investment funds. When you buy an ETF, you invest in a basket of securities or a stock index. The performance of the security depends on the performance of the instruments in which it invests.
Institutions want Bitcoin ETFs
However, the demand for these products seems to be very high if you think that the first listed Proshares Bitcoin ETF raised almost $1 billion in just one day.
That is because, according to analysts, these instruments allow institutional investors to invest in cryptocurrencies without having to buy the cryptocurrency itself, something that many institutional funds are not yet permitted by statute, being precisely instruments that are not yet fully regulated.