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In July, the Swedish XBT provider introduced a note traded on the stock exchange with Bitcoin (ETN) on the US market. This week, the US Securities and Exchange Commission (SEC) suspended the ETN for 10 days.
On September 10, the SEC issued an official statement regarding its decision to suspend the Bitcoin Tracker One ETN for ten days, until September. 20. The statement, published on the SEC's website, explicitly stated that the two XBT Provider ETNs caused confusion among investors.
Essentially, the SEC claimed that Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF) directly or indirectly misled investors by marketing the two products in a way that did not clearly describe the difference between an ETF and an ETN on assets digital.
The SEC said:
"The Commission has temporarily suspended trade in CXBTF and CETHF securities due to confusion among market participants regarding these instruments.This order was entered under Article 12 (k) of the Securities Exchange Act of 1934 (Exchange Act). "
Why does the SEC suspend it?
According to Jake Chervinsky, a defensive defense lawyer for disputes and & securities at Kobre Kim LLP, the suspension of the SEC of the two ETBs of XBT Providerit has no relation to the regulatory status of Bitcoin and ETH, the native cryptocurrency of Ethereum, in the United States.
Rather, Chervinsky explained that CXBTF and CETHF failed to provide a lack of current, consistent and accurate information about their ETNs. It is possible that the buyers of the CXBTF and the CETHF were deceived in the process of investing in cryptocurrencies in the US market, probably thinking that the two instruments were ETFs.
"This is a problem with CXBTF and CETHF, not with bitcoin or ether, as explained by the full suspension order of the SEC, the problem is" a lack of current, consistent and accurate information "about these products, as if they were ETFs, ETNs or something else, "Chervinsky said.
While ETNs are similar to ETFs because investors can still benefit from the price movement of an asset, a stock or a target commodity, ETNs do not represent ownership. For example, when an investor invests in Bitcoin through an ETF, the investor can receive BTC in its real form from the ETF provider.
With ETNs, investors are investing in structured products issued as senior debt securities that have no insurance and are vulnerable to credit risk.
ETNs can be reliable depending on their suppliers and on the track record of the asset itself. But it does not offer the same level of protection, insurance and credit risk mitigation as an ETF.
So, for the SEC, if an investor buys Bitcoin ETNs like CXBTF and CETHT on the assumption that they offer ETF services, it can be a problem. The SEC needs both investors and ETNs to recognize the difference between an ETF and the ETF, to avoid confusion in the market
Not a Big Deal
Many investors in the cryptocurrency market have described the extensive report on the SEC's decision to suspend two ETCOs of Bitcoin and Ether as FUDs (fear, uncertainty and doubt), and it is hard to say that it is not, as the suspension of CXBTF and CETHT is not significant and certainly not enough to have any kind of impact on their underlying digital assets.
Images from Shutterstock
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