Bitcoin is a "highly speculative investment" and investors interested in mutual funds with exposure to the bitcoin futures market weigh the risks carefully, the Securities and Exchange Commission's division of investment management said in a statement Tuesday.
Investors interested in bitcoin futures should consider the volatility of bitcoin and the bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying bitcoin market, the SEC said.
The SEC said it will continue to monitor the impact of mutual funds' investments in bitcoin futures on investor protection, capital formation and the fairness and efficiency of markets. As part of the effort, the staff will "consider whether, in light of the experience of mutual funds investing in the bitcoin futures market, the bitcoin futures market could accommodate (exchange-traded funds), which, unlike mutual funds, cannot prevent additional investor assets from coming into the ETF if the ETF becomes too large or dominant in the market, or if the liquidity in the market starts to wane," the SEC said.
The SEC has not yet approved a bitcoin exchange-traded fund, though several applications for approval of such funds are currently pending. Several firms, including VanEck Associates, New York Digital Investment Group, Valkyrie Digital Assets and WisdomTree Investments, have bitcoin ETF proposals before the SEC.
SEC Chairman Gary Gensler, who was sworn in last month, has an extensive knowledge of digital assets. The former chairman of the Commodity Futures Trading Commission, and more recently a professor at the MIT Sloan School of Management, has taught classes and testified before Congress on digital currencies and blockchain technology.
Cryptocurrency stakeholders told Pensions & Investments in April that Mr. Gensler's background is a positive for the industry.
But Tuesday's statement didn't ooze bitcoin positivity.