It has been a stormy few days in the world of cryptocurrencies.
With pioneer Bitcoin trading at well below its all-time highs, the US regulator, the Securities and Exchange Commission (SEC), has again rejected proposals for cryptocurrency exchange traded funds (ETFs).
Such funds are investment vehicles that trade on financial exchanges much the same as if they were stocks.
Bitcoin remains in demand
Probably the last thing cryptocurrency operators, traders and investors needed was a high-profile official investigation into the sector, yet this is precisely what occurred when the state of Colorado announced it was looking into three cyber-currency firms over allegations of unregistered “initial coin offerings” (ICOs), the launch process whereby cryptocurrency is offered to the public.
The SEC’s imprimatur for proposed cyber-currency ETFs would be seen by many as a sign that the sector has come of age. But until now, the agency has flatly refused to approve one.
Its most recent rejection involved eight proposed ETFs, two put forward by ProShares, another from GraniteShares and five proposed ETFs from Direxion. All are ETF promoters.
ProShares ETFs would track bitcoin futures contracts, as would that from GraniteShares. Direxion’s ETFs would have allowed traders to profit from, or at least protect themselves against, a falling market.
In July, the SEC threw out a proposal for an ETF that would have traded physical bitcoin.
All these rejections, said the SEC, were related to concerns about the scope for fraud and manipulation in cryptocurrencies.
Meanwhile, Colorado’s Department of Regulatory Agencies (DORA) has announced it is looking into three companies alleged to have arranged unauthorised ICOs. They are “Bionic Coin, Sybrelabs Ltd. (also known as Cryptoarb), and Global Pay Net (also known as Glpn Coin and Gpn Token),” said DORA, adding that previous inquiries have taken in Bitcoin Investments Ltd. (also doing business as Db Capital), Estatex, Bitconnect Ltd., and Magma Foundation (also doing business as Magma Coin).
All the probes seek to delve “into what has become a trend of allegedly fraudulent companies looking to make quick money” and investigate these concerns more fully.
Supporters of cryptocurrencies point out that the “distributed ledger” system, under which all participants can see how many coins are being created and being bought, is more transparent than the classical “central registry”, under which a bank or similar institution is the sole record holder.