By Mark S. Nelson, J.D.
The SEC issued a trading suspension order over the past weekend for a pair of virtual currency tracking exchange traded products (ETPs). Bitcoin Tracker One and Ether Tracker One, issued by Swedish firm XBT Provider AB (publ), are listed and traded on NASDAQ/OMX in Stockholm but have also have been quoted in OTC Markets Group, Inc.’s OTC Link. The trading suspension, which began yesterday, will remain in place until September 20, 2018 (Release No. 34-84063, September 9, 2018).
The SEC issued the order to suspend trading of the two virtual currency trackers because of perceived confusion in the marketplace. Specifically, it was unclear if the ETPs were exchange traded funds, exchange traded notes or, as issuer XBT Provider AB dubbed them, “non-equity linked certificates.” The SEC explained that the confusion arose from multiple sources, including materials submitted by broker-dealers to offer the virtual currency trackers in the U.S.
For its part, XBT Provider AB issued a press release seeking to clarify that the trading suspension applies only in the U.S. and that the firm understood the basis for the trading suspension to be that the firm’s tracking ETPs may have confused market participants. “XBT Provider AB has not sought registration or trading of these securities in the U.S. and has no responsibility to provide any information with respect thereto to U.S. market participants,” said the firm.
Previously, the SEC temporarily suspended trading in several virtual currency-related securities because of the lack of current, accurate information about the securities. Similar orders also have been issued where there was unusual trading activity or an abrupt change in the business model being followed by the firm, such where a company suddenly became a cryptocurrency company by way of acquiring a cryptocurrency firm. Thus far, the Commission has declined to approve virtual currency-based ETPs, although the Commission said it will review the applications by several exchanges to list and trade the shares of ETPs that were recently disapproved by the Division of Trading and Markets.
The release is No. 34-84063.