Bitcoin ETFs derailed by SEC worries

The regulator’s concerns include the safety of tying frequently traded ETFs to potentially illiquid assets and whether funds can be accurately valued when prices for digital coins are all over the map, said people with knowledge of the matter.

The next step in the bitcoin revolution will take a bit longer than some anticipated.

The U.S. Securities and Exchange Commission has slammed the brakes on a dozen bitcoin exchange-traded funds and two cryptocurrency mutual funds since Monday, making the week a watershed for Washington, D.C., pushing back on the investment craze of the moment.

The regulator’s concerns include the safety of tying frequently traded ETFs to potentially illiquid assets and whether funds can be accurately valued when prices for digital coins are all over the map, said people with knowledge of the matter.

The go-slow approach isn’t what financial firms expected. When bitcoin futures started trading last month on CME Group and Cboe Global Markets exchanges, it triggered speculation that there would soon be a range of crypto ETF and mutual-fund offerings. That in turn would draw hordes of new investors and lift bitcoin even higher after it surged more than 1,400 percent last year.

“This is not business as usual; it’s brand-new terrain,” said Javier Paz, a senior analyst at consultancy Aite Group. “The SEC’s approach is prudent and a sign of the times. Somebody needs to be the grown-up in the room, to feel comfortable about handing out the keys to the ETF world.”

An SEC spokeswoman didn’t respond to a request for comment.

Several fund companies were told by the SEC to pull their applications after the regulator’s staff said it was worried about protecting investors, said the people, who asked not to be named in discussing private conversations. The agency also wants more time to review whether the proposed funds actually comply with U.S. securities laws, considering that some…

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