US SEC, the securities and exchange commission has temporarily suspended trading in two securities related to cryptocurrencies on Sunday, citing confusion amongst market participants regarding these instruments.
According to the statement released by the US SEC, the suspended securities are Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF). The suspension is temporary and it started Sunday and will end on Sept. 20.
The SEC said that,
The Securities and Exchange Commission (“Commission”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) commencing at 5:30 p.m. EDT on September 9, 2018, and terminating at 11:59 p.m. EDT on September 20, 2018.
The mission of the US SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC attempts to promote a market habitat that is worthy of the public’s trust.
The US SEC further elaborated that this suspension is temporary and this order was entered in accordance to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act). It has also alerted broker-dealers, shareholders, and potential clients that they should carefully consider the stated information along with all other currently handy information and any information afterward issued by the company.
It has also warned that brokers who will allow clients to trade Bitcoin Tracker One and Ether Tracker One or offer tender on the securities during the suspension could be subject to enforcement actions.
If any broker or dealer is uncertain as to what is required by Rule 15c2-11, he should refrain from entering quotations relating CXBTF or CETHF securities until such time as he has familiarized himself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.
This is not the first time SEC has come down heavily on cryptocurrencies. A few days ago, three bitcoin ETF proposals of 9 products were submitted by Bethsada, Maryland based ProShares, New York, New York based Granite Shares and Milwaukee, Wisconsin based Direxion were rejected by the SEC. There were several reasons behind their decision. However, the single, primary reason that ran similarly in all three responses by the SEC regarded uncertainty behind cryptocurrency assets. Their concern is not over the security of the individual coins themselves, but rather the value they hold.
A few days ago, US SEC also issued a penalty of $30000 against the founder of a company that executed a fraudulent initial coin offering (ICO) to fund oil exploration and drilling in California. The ICO named Tomahawkcoins failed to raise money and still issued tokens through a “Bounty Program” in exchange for online promotional services. It also claimed that ‘token owners would be able to convert the Tomahawkcoins into equity and profit from the oil production and secondary trading of the tokens.
According to SEC, the company tried to raise funds through the sale of blockchain-based digital tokens and it used inflated projections of oil production that were contradicted by the company’s own internal analysis and misleadingly suggested that Tomahawk possessed leases for drilling sites when it did not.
Bitcoin Tracker One: It is traded in the same way as any share or instrument listed on the Nasdaq exchange. To invest, users need an account, which is secured through a bank, advisor or online broker. In the year 2015, Bitcoin Tracker One was the first bitcoin-based security accessible on a regulated exchange when it listed on NASDAQ/OMX.
Ether Tracker One: It is also traded in the same way as any share or instrument listed on the Nasdaq exchange. To invest, users need an account, which is secured through a bank, advisor or online broker. In the year 2017, Ether Tracker One was the first publicly traded, ether-based security accessible on a regulated exchange when it listed on NASDAQ.
US SEC has also warned that many platforms for trading digital assets call themselves as “exchanges,” which can give the false impressions to traders and investors that they are regulated or they have fulfilled all the regulatory standards of a national securities exchange then investors should understand how the products are traded and if investment sounds too good to be true then be cautious.