The U.S. Securities and Exchange Commission (SEC) has reportedly rejected Valkyrie’s leveraged Bitcoin ETF alongside Direxion Bitcoin Strategy Bear ETF.
SEC signalled in their report that the regulator is not yet ready for those that provide leveraged exposure to bitcoin futures.
About two days ago, Direxion filed for a Bitcoin Strategy Bear ETF that enables speculators to buy futures that short the price of Bitcoin. And the same day, Valkyrie filed for a leveraged BTC futures ETF that would have offered up to 1.25x exposure to the digital asset.
Direxion initially filed for a Bitcoin ETF in 2018. But it ended up in the pending files with others that the SEC had delayed at the time.
While Direxion products would have only invested in futures, Valkyrie would have held futures, swaps, options, and forwards. Also Reportedly, SEC is currently only interested in direct futures product funds that buy contracts from the Chicago Mercantile Exchange (CME).
It seems so that the government agency is not interested in approving any products that invest directly in the asset itself. Or anything other than CME futures. Which limits the investor exposure to offerings that are deemed vulnerable to fraud.
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“This is a product the SEC has long had a case of approver’s remorse around. These products tend to get quite a lot of attention for all the wrong reasons.”Ben Johnson, analyst at Morningstar
While the present seems to align with Ben’s words. It is also worth noting that earlier last month, SEC Chair Gary Gensler said that ETFs “can pose risks even to sophisticated investors, and can potentially create systemwide risks by operating in unanticipated ways when markets experience volatility or stress conditions”.
Also, at the same time, the regulatory agency approved two new ETFs this month. Where the investors are allowed to make leveraged or inverse bets on futures contracts on the Cbow Volatility Index or VIX.