The United States Security and Exchange Commission has on various occasions been accused of hindering bitcoin and blockchain-related investment through its regulatory policies. The commission–yet to approve a bitcoin ETF–is reportedly seen as restricting blockchain and cryptocurrency. In cryptocurrency news today, the commission reportedly encouraged exchange-traded funds (ETFs) to remove “blockchain” from their names before trading.
U.S. Securities and Exchange Commission Asked ETFs to eliminate the word ‘Blockchain’
According to a report on Business and market news outlet Bloomberg, the U.S. Securities and Exchange Commission encouraged at least two ETF funds to eliminate the word blockchain from their names before trading. In the report published on Friday, April 12, Bloomberg cited anonymous sources who said the request to remove words like blockchain was to avoid confusing investors.
Per Bloomberg, The exchange-traded fund (ETFs of Amplify (BLOK) originally included blockchain but was encouraged to replace it with “transformational data sharing ETF.” Another similar case is the ETF of Reality Shares which trades as BLCN but is described as “Nasdaq NexGen economy ETF” instead of a blockchain. CEO Eric Ervin confirmed to Bloomberg that the final name of the fund was a compromise with regulators. There are other blockchain-related funds who also had to change their names at the SEC’s request.
Use of Trendy Words like Blockchain, 5G is on the Rise
Catchy names—or thematic names—for ETFs are becoming more common in recent years as funds are seeking to take advantage of new trends like blockchain, 5G, electric cars, and gaming. “More than 10 percent of new ETFs last year targeted a theme, and assets in these funds have nearly tripled between 2014 and 2018,” Bloomberg wrote.
But the names must not deceive investors.
“Names have to match up to what the fund does,” SEC Commissioner Hester Peirce said earlier this year echoing SEC’s regulatory policy about the naming of ETFs. A new rule adopted by the SEC in 2001 requires that funds ensure at least 80 percent of assets are in the type of investments suggested by their monikers.
U.S. Securities and Exchange Commission Cracks down on Blockchain Names
Last year the U.S. SEC promised to crackdown on companies who include blockchain to their names to capitalize on the blockchain hype. One company readily comes to mind, Long Island Iced Tea Corp. The company changed to ‘Long Island Blockchain Corp.’ before it raised its stock prices enough to prevent it from being delisted by NASDAQ. This is among a number of additional scrutinies the commission has on the blockchain and cryptocurrency industry.
What is a blockchain company?
The crackdown on “blockchain” names begs the question “What is a blockchain company?” A list of Blockchain companies to look out for in 2019 by Forbes author, suggests that blockchain companies refer to those which has blockchain technology as the core of their services—more likely to fulfill SEC’s 80 percent requirement—to use the “Blockchain” name.
SEC Criticized for its approach towards Blockchain and Cryptocurrency
As Smartereum reported, the U.S. Securities and Exchange Commission has received several criticisms over its handling of blockchain and cryptocurrency in the country. One of the core concerns of crypto enthusiasts is the xrp security status and the security status of ICO tokes like Ethereum (ETH security status). Earlier this month, the commission released an ICO token guideline which did not clarify the xrp security status but only tried to apply Howey Test to crypto tokens in general.
Michael Arrington, the Founder of the technology news outlet, Tech Crunch who alo runs a Blockchain-focused investment fund recently called SEC’s regulatory approach to cryptocurrency a “total disaster” which made investing in non-US crypto companies better than those in the country. In a similar manner, John Berlau, a senior fellow at Competitive Enterprise Institute referred to the U.S. SEC’s Limitless Power Grab approach towards cryptocurrency. He said SEC’s “burdensome regulation” is killing blockchain and cryptocurrency innovation in the country.
It is not news that the commission has turned away several Bitcoin ETF proposals citing bitcoin volatility and need to protect investors.