cryptocurrency

SEC Temporarily Pauses Trading of Cryptocurrency

bitcoin mining

Over the last year, and maybe longer, we’ve debated the idea of cryptocurrency.  Is it good?  What is it?  How does it work?  Is this something that people would want to use, or is it something that we just don’t know enough about yet?  It seems obscure.  It’s not really money, but it has a high value.  People with a lot of it seem to be getting kidnapped, or they live in really secure houses.  Further to that, we don’t even know the real names behind the people who are trading it.  Why is that?  Because it’s value is so high, it makes it difficult to be known as having it.  Sure, you can go and rob someone for $1000, maybe.  Force them to take it out of their bank account.  But cryptocurrency is big business.

Further, it’s an interesting world when technology meets finance, isn’t it?  Now, the U.S. Securities and Exchanges Commission (SEC) has initiated a suspension of its cryptocurrency-based Exchange-Traded Notes (ETN).  While this might come as shocking news to many, it’s only temporary. In an announcement made yesterday, the SEC declared a suspension of trading in the ETN securities known as Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF).  The temporary ban has been instigated because there is still a lot of confusion in the market over these trading instruments.  Which, shouldn’t surprise us at all.

“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).”

I mean, how can you not be confused about the whole idea trading something that isn’t tangible?  This pause in trading will only last until September 21, so if you’re interested in trading these cryptocurrency ETNs you can do so, starting after 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.

Despite the fact that ETN’s are 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.  Which makes you wonder if two weeks is going to be enough time?  As I’ve said in the past, cryptocurrency is a bit of an unknown.  Maybe that’s an understatement.  In general, it’s hard to wrap your brain around it.  It’s not like stocks, in that you have a specific share in a company.

When you cash in your stock, it gives someone else an opportunity to buy that stock and you, in return get money for it.  Cryptocurrency is mined.  It’s technological.  But it’s not like mining gold or diamonds.  It doesn’t exist in a way that many of us understand.  Which is why I’m not surprised at all that the SEC needs some time to work through the trading aspect of it all.  I think we will see more of this over the next few years as this sector continues to emerge.

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