Thus far, no exchange traded products related to digital currencies have been approved by U.S. regulators. Derivatives help increase liquidity and improve markets for an asset category by allowing investors to bet on ups and downs of an asset, evening allowing individuals to adopt market-neutral strategies. They are also a key component in the creation of many futures-backed ETFs utilized by a range of investors.
Earlier this month, the SEC warned investors on the risks associated with cryptocurrencies. The SEC points out that some digital currency market participants and promoters of initial coin offerings (ICOs) are not following federal and state laws that govern other parts of financial markets, such as stocks and bonds.
“Financial groups have long talked of creating bitcoin and general cryptocurrency exchange-traded funds (ETFs) to make the currency more accessible to casual and institutional investors, but several fund managers shelved their plans for such funds this past week, citing SEC concerns,” according to The Hill.
For more information on the cryptocurrency market, visit our Bitcoin category.