(Bloomberg) - Even if funds say they have received initial SEC registration approval, it has created a potential watershed in the quality of regulation to launch funds traded on our cryptocurrency exchanges.
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Issuers Rex Financial and Osprey Funds aim to launch ETF tracking Ethereum and Solana, which provide accumulated exposure, which allows investors to win rewards by committing tokens to help operate blockchains.
Now, U.S. regulators are raising concerns that vehicles may not legally qualify for ETFs under the federal securities laws.
Securities and Exchange Commission staff said in legal entities sent to ETF Opportunity Trusts late Friday, including legal entities managed by companies such as REX, that the two ETFs may not meet the legal definition of investment companies, which is the designation required for funds to be listed on the stock market.
The Securities and Exchange Commission (SEC) said this was concerned that the funds “improperly filed the registry” and that “disclosures disclosures about the status of funds as an investment company in the registration statement may be misleading.”
"We think we can meet the SEC on investment companies and we don't intend to roll out funds until we do so," said Greg Collett, general counsel for Rex Financial.
The SEC declined to comment.
SEC Commissioner Caroline Crenshaw, the committee's only Democrat, often criticized its new view on cryptocurrencies in President Donald Trump's administration, which he said symbolizes the agency's recent piecemeal approach to cryptocurrency regulations.
During his re-election campaign, Trump touted his digital collection, gathered campaign donations from crypto fans and said he would make the United States "the crypto capital of the planet."
Since February, after the special advisory panel for cryptocurrencies was formed, SEC staff issued a statement stating that crypto assets such as Memecoins and Stablecoins are not securities, meaning they are not within the jurisdiction of the SEC.
Crenshaw said in a statement Saturday that the company saw an opportunity to register a new product on the SEC.
“These crypto assets are said to be not securities when it comes to registration requirements, but securities are convenient when registrants see an opportunity to sell new products,” she said. “If you’re confused, join the club.”
This is the second time in recent months that an investment in listed asset investments instead of asset classes has been made public.
In March, it was hours after listing the fund, the company rebuked State Street and Apollo Global Management's ETFs.
"Even if the SEC does not allow this structure to be listed, we still think that allowing more direct attempts to appear in the U.S. ETF will eventually succeed," said James Seyffart, an analyst at Bloomberg Smart ETF. "It's a question of when, not. But the SEC doesn't seem to be a fan of the way Rex is trying to push these lists."
Rex said it received so-called valid registrations for both ETFs earlier on Friday, meaning they can be listed at any time. Rex founder Greg King said the company was planning to launch in mid-June at the time.
"To some extent, these issues have not been resolved and the commission's staff will consider appropriate next steps to ensure compliance with federal securities laws," the Securities and Exchange Commission said Friday.
(From paragraph 8, comments from SEC Democratic members are updated.)
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