US SEC Likely Not to Approve Bitcoin Leverage Fund

Authorities Express Concerns Over Risks of Cryptocurrency Leverage Products

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The U.S. Securities and Exchange Commission (SEC) reportedly plans not to approve the launch of leveraged Bitcoin funds.

On the 27th (local time), the Wall Street Journal (WSJ), citing sources, reported that "the securities authorities plan to approve only non-leveraged funds related to Bitcoin, such as the previously launched Bitcoin futures exchange-traded funds (ETFs), for the time being."

WSJ analyzed, "Regulators are tightening product launch regulations to limit investors' access to products vulnerable to fraud and manipulation," adding, "The asset management industry’s efforts to launch new products leveraging investors' interest in cryptocurrencies are facing challenging circumstances."

This plan by the U.S. securities authorities comes as Bitcoin ETFs were launched for the first time recently in the U.S., and cryptocurrency prices reached all-time highs.

Earlier, on the 19th, the first Bitcoin futures ETF listed on the New York Stock Exchange, the 'ProShares Bitcoin Strategy ETF,' attracted $1 billion (about 1.2 trillion KRW) in funds within two days of its launch, becoming the fastest ETF to raise funds among all ETFs.

Although expectations are growing that cryptocurrencies will be incorporated into mainstream finance, if regulators limit the types of Bitcoin-related derivatives, it will inevitably hinder the institutional adoption of cryptocurrencies.

Previously, the U.S. asset management firm Valkyrie Investments planned to launch a leveraged product designed to provide 1.25 times the daily returns of various Bitcoin derivatives such as futures and options, but WSJ reported that the firm was ordered by authorities to postpone the launch.

Ben Johnson, an analyst at Morningstar, said, "These (leveraged fund) products often attract regulatory attention for all sorts of negative reasons."

So far, the U.S. asset management industry has launched leveraged products with high risks but correspondingly high returns in areas attracting investor interest, but WSJ reported that the SEC judges these products as unsuitable for non-professional investors.

Earlier this month, SEC Chairman Gary Gensler warned, "(Leveraged ETFs) can pose risks even to professional investors," adding, "There is a risk that they could create potential risks throughout the financial system in unexpected ways."

This content was produced with the assistance of AI translation services.