SEC Says Crypto-Based Funds Not Ready For Regulation

The Investment Company Act of 1940 is the source of regulation for all mutual funds, closed-end funds, hedge funds, private equity funds, and holding companies. The letter contains questions that the SEC believes must be answered in order for them to consider supporting the idea of a cryptocurrency-based fund. The risk of fraud and market manipulation, already brought up in an August 2017 SEC bulletin in relation to Initial Coin Offerings, is again repeated in this letter in relation to exchange-traded funds. "We do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products, and we have asked sponsors that have registration statements filed for such products to withdraw them."
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