Thursday, May 19 2022
SEC Chairman Gary Gensler.
  • The SEC has asked Valkyrie to withdraw its leveraged bitcoin ETF application, the WSJ reported.
  • He wants to limit the exposure of crypto investors to non-leveraged funds like the ProShares ETF launched last week.
  • Chairman Gary Gensler said complex leveraged ETFs can present risks even for sophisticated investors.
  • Sign up for our daily newsletter here, 10 things before the opening bell.

The Securities and Exchange Commission does not want to approve leveraged bitcoin exchange-traded funds, the Wall Street Journal reported on Wednesday, citing a person familiar with the matter.

Going through an SEC request to at least one asset manager, it appears the agency wants to restrict crypto investors to products offering unleveraged exposure, such as the ProShares Bitcoin Strategy ETF, according to the report. .

ProShares is the very first US ETF linked to bitcoin that started trading last week. It does not invest or hold bitcoin directly, but invests in bitcoin futures contracts.

After launching its own bitcoin futures ETF last Friday, Valkyrie Investments is awaiting a response on its leveraged fund product. The asset manager on Tuesday deposited a leveraged bitcoin futures ETF offering 1.25 times exposure to the benchmark bitcoin rate. This means that the fund seeks to increase the daily returns of a bitcoin derivatives portfolio for US investors using 1.25 times leverage or borrowed money.

But Valkyrie has been asked to withdraw her candidacy, the Journal reported, citing a source. Thursday, the deposit was still effective.

The move highlights further regulatory opposition to innovative products facing asset managers in the nascent crypto asset management industry. Since the Winklevoss twins first filed an application to launch a bitcoin-linked ETF in 2013, it has taken almost a decade for the SEC to green light a product like this.

The Wall Street watchdog has been reluctant to allow offers that it believes may be vulnerable to fraud, manipulation and other such risks, the Journal said.

Chairman Gary Gensler said earlier this month that complex leveraged ETFs “can present risk even to sophisticated investors, and can potentially create system-wide risk by operating in unforeseen ways when markets experience volatile or stressful conditions.

Separately, on Tuesday, ETF issuer Direxion said in a filing that it wanted to short the price of a bitcoin futures contract. The Direxion Bitcoin Strategy Bear ETF would effectively allow investors to bet against the bitcoin futures contract used by the ProShares ETF.

Under the rules that govern ETF proposals, the agency has 75 days to respond to offer documents before they automatically come into effect.

As a courtesy, the SEC may require fund managers to withdraw their statements in certain cases. But issuers have a choice of whether or not to want it, in case they want to force the regulator to make a decision.

Read more: $ 3 trillion ‘megatrends’ chief iShares shares 4 market areas he believes are best positioned to reap big returns in years to come as worst COVID recedes


Nomination Productivity Commission, departmental promotions, new faces of the ARC


Ease My Trip travel portal acquires Traviate

Check Also