SEC tells investors to be wary of bitcoin futures due to volatility and fraud, as regulators ramp up crypto scrutiny

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SEC tells investors to be wary of bitcoin futures due to volatility and fraud, as regulators ramp up crypto scrutiny
Gary Gensler heads the Securities and Exchange Commission.Photo by Chip Somodevilla/Getty Images
  • The SEC warned investors over bitcoin futures, saying the cryptocurrency is volatile and speculative.
  • It also said the market lacked regulation and had the potential for fraud and manipulation.
  • Regulators around the world are stepping up their scrutiny of the market as bitcoin booms.

The US market regulator has warned investors about investing in funds with exposure to bitcoin futures, saying the market is volatile, unregulated and has the potential for fraud.

The Securities and Exchange Commission released a notice on Thursday urging those considering bitcoin futures funds "to weigh carefully the potential risks and benefits of the investment." The notice was issued with the Commodity Futures Trading Commission.

"Among other things, investors should understand that bitcoin, including gaining exposure through the bitcoin futures market, is a highly speculative investment," it said.

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"As such, investors should consider the volatility of bitcoin and the bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying bitcoin market." Futures are contracts that allow people to speculate on the future bitcoin price.

Regulators are stepping up their focus on bitcoin and other cryptocurrencies, which boomed in the first five months of the year before falling sharply in May.

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Bitcoin traded at around $37,500 on Friday, around 42% below April's record high, giving a sense of the volatility of the asset. Heightened scrutiny from Chinese regulators is one factor in bitcoin's recent decline.

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The SEC's warning followed the suggestion from the top global banking regulator for tough new rules for financial institutions that have exposure to bitcoin.

Rule-makers and central banks have been warning for months about the dangers of cryptocurrencies because of growing concern that investors could get burnt in the bitcoin boom.

Analysts have said that the SEC's concerns about the dangers of bitcoin investments make it unlikely that the regulator will approve crypto exchange-traded funds any time soon.

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Osprey Funds founder Greg King told CNBC on Monday he thinks a bitcoin ETF in the US could come in 2022.

King, who plans to launch a bitcoin ETF in the US, said: "Personally, I think if something happens, it's more likely in 2022. It's just really getting going. These things take time."

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