10 Sep 2018 · 2 min read

US Regulator Suspends Swedish Crypto Products

American regulator the Securities and Exchange Commission (SEC) issued an immediate suspension order for trading in two Swedish cryptocurrency investment products over the weekend, claiming traders had become confused as to whether the products could be considered as exchange-traded funds (ETFs).

Source: iStock/Starcevic

The SEC is opposed to the use of ETFs as a means of investing in cryptocurrencies, and has attempted to ban them altogether from the United States market. A number of companies have been trying to find a way around the regulations, however, as many in the country would like to trade cryptocurrencies in the same way as conventional stocks and shares are bought and sold.

One of the ways was Bitcoin-based ETN (exchange traded note) listed on Nasdaq Stockholm exchange, under the ticker CXBTF, as reported.

However, now, per a statement on the SEC’s website, investors will now be frozen out of trading in XBT Provider AB’s Bitcoin Tracker One CXBTF.PQ CXBTF.PK and Ether Tracker One CETHF.PQ CETHF.PK until September 20 at the earliest.

Although they are not listed on any United States stock exchange, XBT Provider AB’s products are both listed on a Nasdaq-registered exchange in Sweden, and over the counter (OTC) transactions are common in America.

The SEC cited a “lack of current, consistent and accurate information” as its reason for action, and claimed “application materials submitted to enable the offer and sale of these financial products in the United States […] characterize [the products] as ETFs.” The SEC also alleges that “certain trading websites” are currently referring to the products as ETFs.

"During such trading suspension, however, a broker-dealer may engage in activities within the United States solely for the purpose of assisting non-broker-dealer customers with the liquidation of owned positions held as of the date of this order in a transaction (or series of transactions ending with a sale) effected on the Nasdaq Nordic or other trading platform located outside the United States or with non-US persons located outside the United States including the issuer," the SEC added.

ETNs are close cousins to ETFs (exchange traded funds), but there are some key differences. ETNs are structured products that are issued as senior debt notes, while ETFs represent a stake in an underlying commodity. ETNs are more like bonds in that they are unsecured. ETFs provide investments into a fund that holds the assets it tracks, like stocks, bonds or gold.

Meanwhile, now all eyes are still on the much-discussed VanEck ETF that the SEC is expected to decide on by September 30.