The SEC shut down trading for Bitcoin Tracker One (CXBTF) and Ether Track One (CETHF) until at least September 20th.
The week got off to some mild panic attacks for cryptocurrency advocates. The price of Bitcoin had been steadily chugging upward, hitting $7,387 last Wednesday, but it dropped down to $6,443 later in the day and then danced around the $6,500 mark all weekend. Then came the news on Sunday that the SEC had stopped trading for two investment vehicles that track crypto: Bitcoin Tracker One (CXBTF) and Ether Track One (CETHF). Uncertainty and confusion became the bywords of the day.
SEC Takes Action
Bitcoin Tracker One (CXBTF) and Ether Track One (CETHF) are managed by XBT Provider AB, a Swedish company. The entities provide stock access to cryptocurrencies. While they are both listed on the Nasdaq in Sweden, trades are “over the counter” off exchanges in the USA.
In the order by the SEC, the government watchdog states:
It appears to the Securities and Exchange Commission (SEC) 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.
For example, the broker-dealer application materials submitted to enable the offer and sale of these financial products in the United States, as well as certain trading websites, characterize them as ‘Exchange Traded Funds.’ Other public sources characterize the instruments as ‘Exchange Traded Notes.’ By contrast, the issuer characterizes them in its offering materials as ‘non-equity linked certificates.’
CXBTF and CETHF are listed and trade on the NASDAQ/OMX in Stockholm and have recently been quoted on OTC Link (previously “Pink Sheets”) operated by OTC Markets Group, Inc.
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.
No Need to Panic
Jake Chervinsky, a lawyer specializing in government enforcement defense and securities litigation, says everything is alright. He pointed out that there is no problem with Bitcoin or Ether from the point-of-view of the SEC. The problem actually lies with the ETNs themselves as the SEC’s “issue is ‘a lack of current, consistent and accurate information’ on these products, such as whether they are ETFs, ETNs, or something else.”
This is a problem with CXBTF and CETHF, not bitcoin or ether.
As the full SEC order of suspension explains, the issue is "a lack of current, consistent and accurate information" on these products, such as whether they are ETFs, ETNs, or something else: (https://t.co/vXaPrOqJpx) https://t.co/4el9eERyjU
— Jake Chervinsky (@jchervinsky) September 10, 2018
The SEC notes that the documents given to them by Bitcoin Tracker One and Ether Track One state they are ETFs. However, they are actually ETNs (exchange-traded notes), wherein they back all notes with Bitcoin or Ether.
As the SEC has consistently rejected Bitcoin ETF applications, the fact that they have shut down Bitcoin Tracker One and Ether Track One makes perfect sense as they filed documents claiming to be ETFs. Yet XBT Provider AB declares them to be something else entirely.
This is a really just a big ball of confusion, and one that the SEC intends to untangle. It should be noted that this order is only temporary. Chances are that XBT Provider AB will file additional paperwork to declare that the two ventures are not cryptocurrency ETFs at all.
Overall, the reaction by Bitcoin has been pretty ho-hum. While a lot of angst has been expressed over this action by the Securities and Exchange Commission, BTC has remained relatively stable all week. Bitcoin was trading for $6,214 on Sunday, then $6,331 on Monday, and currently at $6,369.
As for the SEC’s final decision on the latest Bitcoin ETF application, we’ll have to wait until the end of the month to find that out.
What do you think about the SEC halting trading in Bitcoin Tracker One and Ether Track One? Let us know in the comments below.
Images courtesy of Shutterstock and Twitter/@jchervinsky.