The U.S. SEC has announced that it has halted the trading of Bitcoin Tracker One and Ether Tracker One exchange-traded notes (ETNs).
The Securities and Exchange Commission announced the temporary suspension of trading in the securities Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) commencing at 5:30 pm EDT Sept. 9, 2018 and terminating at 11:59 pm EDT Sept. 20, 2018. https://t.co/5z1vEYFBFB
— SEC_News (@SEC_News) September 9, 2018
The exchange-traded notes (ETN) were issued by AB, a subsidiary of CoinShares Holdings. The SEC issued the suspension notice yesterday as the investment instrument sought to appeal to U.S. public markets investors as an alternative to Bitcoin ETFs.
As we previously reported, the ETNs were made available to US investors through Fidelity Investments.
Confused market participants led to suspension
The SEC suspended the ETN’s based on the fact that the investment was being described inconsistently, leading to confusion among investors.
The official notice states:
“The Commission temporarily suspended trading in the securities CXBTF and CETHF because of confusion amongst market participants regarding these instruments. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).”
The commission noted that it has identified inconsistent language when the products are being described. The two products are Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF).
ETF vs. ETN
The main difference between the two is that ETFs are equity-based, meaning the issuer actually hold the assets being tracked while ETNs are debt-based.
When buying into an ETN, you are effectively lending the money to the issuer and they promise to pay it back based on the performance of the underlying asset.
Exchange-traded fund (ETF): this investment product represents ownership in an investment pool, which holds many different individual stocks. By buying one share of an ETF, for example, you gain exposure to all the pooled stocks, therefore you won’t need to buy shares of each individual company in the investment pool.
EXAMPLE: By buying one share of the popular FANG ETF (Facebook, Amazon, Netflix, Google), you would gain exposure to all four stocks at once. This is both cost efficient and convenient for investors.
Exchange-traded note (ETN): this investment product does not represents ownership of the underlying asset. Instead, it is a promise from the issuer that it will compensate you for your shares based on the performance of the underlying asset. In fact, ETN issuers do as they please with your money.
About Bitcoin Tracker One ETNs
Bitcoin Tracker One has been traded the Nasdaq Stockholm Exchange ever since 2015 but investors in the U.S gained access to it just last month. According to Fundstrat’s Tom Lee, ETN’s have a lot of similarities to the much awaited Bitcoin ETF.
Even though the trades are executed using the U.S Dollars, they are cleared, settled, and held in custody in the original market, Sweden, in Swedish Krona. The ETN gives investors’ exposure to Bitcoin and Ethereum, the two leading cryptocurrencies.
However, ETNs are offered as senior debt notes while ETFs represent a share in an underlying commodity, or asset, providing investments into a fund that holds the assets it tracks.
When ETNs became available to US investors last month, the CEO of CoinShares Holdings Ltd, Ryan Radloff, stated that everyone that is investing using the USD will gain exposure to the products.
He added that given the current regulatory stance in the U.S, the move was a big win for Bitcoin in the country.
Are ETNs getting the ETF treatment?
Legal expert Jake Chervinsky pointed out that the main reason why the commission stopped the trading of ETNs is due to lack of current, consistent and accurate information” on these products.
Investors in the country had turned to the ETNs as the SEC continues to reject Bitcoin ETF proposals submitted by cryptocurrency companies. The commission continues to claim that the market is unregulated, which makes it hard for them to approve Bitcoin ETFs.
New crypto-friendly SEC commissioner
However, things might change for ETFs soon with the recent appointment of Elad Roisman by President Trump as the SEC commissioner.
He is viewed as a pro-Bitcoin ETF person, with his call for fairness and transparency when dealing with cryptocurrencies winning him a lot of admirers in the cryptocurrency world.
There is still optimism by cryptocurrency experts and analysts that Bitcoin ETF will be approved by early next year.