SEC suspends trading in bitcoin and ethereum-related products over ETF confusion

  • Two cryptocurrency-related securities, Bitcoin Tracker One and Ether Tracker One, were slapped with a suspension notice by the SEC.
  • The securities watchdog cited confusion over materials characterizing the products as exchange-traded funds.
  • Both securities are listed on the Stockholm stock exchange, part of Nasdaq's Nordic markets.
A visual representation of the digital Cryptocurrency, Bitcoin, is seen on September 04 2018 in Hong Kong, Hong Kong.
Yu Chun Christopher Wong | S3studio | Getty Images
A visual representation of the digital Cryptocurrency, Bitcoin, is seen on September 04 2018 in Hong Kong, Hong Kong.

The U.S. securities watchdog has halted trading in two cryptocurrency-related products because of confusion over the nature of the financial products.

The securities, Bitcoin Tracker One and Ether Tracker One, were slapped with a suspension notice by the Securities and Exchange Commission (SEC) on its website.

The regulator said that broker-dealer application materials and trading websites characterized the products as exchange-traded funds (ETFs) - listed funds that track a basket of assets.

Instead, the securities are "non-equity linked certificates," the SEC said, citing the products' issuer. The SEC ordered trading to be halted until September 20.

"It appears … that there is a lack of current, consistent and accurate information concerning Bitcoin Tracker One (Ticker Symbol: CXBTF) and Ether Tracker One (Ticker Symbol: CETHF), issued by XBT Provider AB (publ), a Swedish company headquartered in Stockholm, resulting in confusion amongst market participants regarding these financial instruments."

It added: "The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above quoted company."

Both securities are listed on the Stockholm stock exchange, part of Nasdaq's Nordic markets, and promise exposure to the price performance of bitcoin and ether, the digital token of the Ethereum blockchain, with less fees.

XBT Provider AB, which is owned by London-based CoinShares, said Monday that the suspension only related to trading activity in the U.S., and that trading in Stockholm would continue. It said the SEC decision "does not relate to any action taken or failed to be taken by XBT Provider AB."

"It is our understanding that this action by the U.S. Securities and Exchange Commission was taken due to possible confusion in the U.S. market regarding these securities," the company said in a statement on its website.

The firm added: "XBT Provider AB has not sought registration or trading of these securities in the U.S. and has no responsibility to provide any information with respect thereto to U.S. market participants. Rather, it is our understanding that, under Securities Exchange Act Rule 15c2-12 any broker-dealer that issue quotations for these securities is responsible for ensuring that required information regarding these securities is available."

It referred to a securities law that prohibits the underwriting of securities where there is insufficient information available.

Investors have been hopeful that the SEC will grant a cryptocurrency ETF this year, but have been left disappointed by multiple rejections and postponements.

This year, the regulator has rejected a fund proposed by Cameron and Tyler Winklevoss, postponed a conclusion on whether to approve VanEck and SolidX's proposed ETF and blocked several other proposals.

The commission will decide whether to approve or disapprove the VanEck and SolidX Bitcoin Trust ETF on September 30.

Approval of an ETF product for cryptocurrencies would likely lift optimism around the arrival of institutional investors into the industry. Futures contracts for bitcoin were introduced last year.

Cryptocurrencies have in recent times risen and fallen dramatically, with the world's largest, bitcoin, surging close to $20,000 late last year, only to fall to around $6,300 as of Monday.