SEC reportedly not approving leveraged Bitcoin ETF | Finbold

The U.S. Securities and Exchange Commission (SEC) will reportedly not approve a leveraged Bitcoin exchange-traded funds (ETF) soon. 

Sources close to the matter indicate that the regulator has directed at least one asset manager not to proceed with plans for the investment product, the Wall Street Journal reports.

The sources claim that SEC’s goal is to limit Bitcoin-related investment products focusing on those that offer un-leveraged exposure.

“The Securities and Exchange Commission asked at least one asset manager not to proceed with plans for a leveraged bitcoin exchange-traded fund, according to a person familiar with the matter. The SEC indicated it wants to limit new bitcoin-related products to those that provide unleveraged exposure to bitcoin futures contracts, such as the ETF, which was launched last week, the person said,” one of the sources said.

This comes after Valkyrie Investments filed with the SEC to offer 1.25x leveraged Bitcoin futures ETF. The firm is among investment companies leveraging the cryptocurrency sector’s growth, aiming to provide new investments products.

Although the Valkyrie filing is still active, the SEC has 75 days to review the fund application. At the same time, the regulator also has the authority to ask fund managers to withdraw filings under certain conditions.

SEC’s approval of first Bitcoin futures ETF

The report follows SEC’s approval of the first Bitcoin futures ETF following several rejections.  The move resulted in Bitcoin hitting a new all-time high of above $66,000.

Over the years, SEC has maintained a hard stance on Bitcoin-related investments products citing risks due to the speculative nature of crypto assets. 

Notably, SEC chair Gary Gensler had initially cited the agency’s concern considering that volatility-linked leveraged ETFs incurred massive losses in 2018 due to market correction, with investors losing significantly. Gensler has maintained that such ETFs pose a challenge to even professional investors.