The U.S. Securities and Exchange Commission (SEC) issued a warning on Monday through its Office of Investor Education and Advocacy, urging investors to carefully consider the risks associated with Bitcoin and Ethereum exchange-traded products (ETPs), including exchange-traded funds (ETFs).
The SEC emphasized that investors should recognize Bitcoin and Ether as highly speculative investments, which also applies to the exposure gained through these exchange-traded products.
The SEC highlighted that investors should take into account the significant price volatility of Bitcoin and Ethereum. Furthermore, the commission warned of potential risks tied to spot Bitcoin and Ethereum ETPs, including price fluctuations and possible fraud in unregulated markets.
The SEC underscored that “spot Bitcoin and Ethereum ETPs are not registered as investment companies under the Investment Company Act of 1940.” As a result, these products lack the asset custody and valuation protections that apply to ETFs and mutual funds. Investors are advised to exercise caution when considering such products and to weigh the potential risks and rewards carefully.