The US Securities and Exchanges Commission (SEC) has initiated a suspension of its cryptocurrency-based Exchange-Traded Notes (ETN). But don’t worry, it’s only temporary.
It appears that this temporary ban has been instigated because there is still much confusion in the market over these trading instruments.
“The Commission temporarily suspended trading in the securities CXBTF and CETHF because of confusion amongst market participants regarding these instruments. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).”
The pause in trading will last only until September 21. So anyone interested in trading these cryptocurrency ETNs can do so starting from that date.
An ETN is a form of debt security. It is unsecured which means it’s not backed by an equal value of collateral, and it is unsubordinated which means that it ranks higher in priority over other types of security.
By buying an ETN you buy into an agreement that the seller will pay you at regular intervals based on the value of the good that the ETN is tied to. In this case Bitcoin BTC or Ethereum.
Though ETNs shouldn’t be confused with Exchange-Traded Funds (ETFs), as they are subtly different products.
As Invetopedia puts it: “ETNs are structured products that are issued as senior debt notes, while ETFs represent a stake in an underlying commodity. ETNs are more like bonds in that they are unsecured. ETFs provide investments into a fund that holds the assets it tracks, like stocks, bonds or gold.”
Despite ETN’s being long-standing trading instruments, it would seem that the SEC still needs more time to clarify exactly how the trading of CXBTF and CETHF should work.
This news brings another hurdle for the market due to the SEC’s continued involvement in the cryptocurrency space. Though the markets do have a history of figuring these things out.
Indeed, the SEC once declared Ethereum as too decentralized to be classed as a security. Despite that, the market managed to make inroads to cryptocurrency trading through the use of ETNs.
Published September 10, 2018 — 10:42 UTC