Today, the Securities and Exchange Commission’s (SEC) Division of Investment Management (IM) issued a letter stating that any investor interested in investing in a mutual fund in the bitcoin futures market is strongly encouraged to do so, but to carefully consider the fund’s risk disclosure, as well as the investor’s own risk tolerance. As with all investments, investors may suffer losses.
Investors should understand that bitcoin, including gaining exposure through the bitcoin futures market, is a highly speculative investment. As such, investors should consider the volatility of the bitcoin and bitcoin futures markets, as well as the lack of regulation in the underlying bitcoin market and the potential for fraud or manipulation.
IM will closely monitor the impact of mutual fund investments in bitcoin futures on investor protection, capital formation, and market fairness and efficiency, in collaboration with Economic and Risk Analysis staff.
As part of this monitoring, IM staff will analyze the liquidity and depth of the bitcoin futures market and consider regulatory requirements related to mutual fund liquidity; analyze the ability of mutual funds to liquidate bitcoin futures positions to meet daily redemptions and the effectiveness of mutual fund derivative risk management and the degree of leverage obtained through derivatives; monitor the valuation of funds’ positions in the bitcoin futures market, and consider the impact of mutual fund participation in the bitcoin futures market on the valuation of that market and the impact of any disruptions to the underlying bitcoin market on its valuation; and assess the ongoing impact of potential bitcoin market fraud or manipulation and its possible impact on the bitcoin futures market.
Among open-end funds, IM staff currently believes that only mutual funds with appropriate strategies, that support such investments, and that adequately disclose material risks should invest in the bitcoin futures market.
Because closed-end funds do not offer the ability to redeem shares on a daily basis, they face different liquidity challenges than open-end funds. The staff encourages any closed-end fund that intends to make an investment in the bitcoin futures market to consult with the staff regarding the fund’s proposed investment, its expected compliance with the Investment Company Act, and how the fund will provide appropriate investor protection before filing a registration statement.
IM staff will disclose the manner in which registered funds will be invested in the Bitcoin futures market, as well as other types of investments in cryptocurrencies and digital assets. This transparency is intended to avoid market uncertainty and to promote fair competition for funds while protecting investors.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/us-sec-bitcoin-is-a-highly-speculative-investment-investors-need-to-be-careful/
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