On January 18, 2018, the Securities and Exchange Commission’s (SEC) Division of Investment Management broke its relative silence regarding the recent growth of cryptocurrencies and cryptocurrency-related products. While signaling that registration of funds intending to invest substantially in cryptocurrency and related products is not on the immediate horizon, the guidance arguably provided the beginnings of a much-needed roadmap for the future development of registered open-ended funds ("mutual funds") and exchange-traded funds (ETFs) linked to cryptocurrencies and related products.
In a letter (the “Staff Letter” and the SEC staff, the "Staff") addressed to the Investment Company Institute (ICI) and the Securities Industry and Financial Markets Association’s Asset Management Group (SIFMA), the Director of the SEC's Division of Investment Management, Dalia Blass, said that it would not be appropriate to initiate registration of mutual funds and ETFs intending to hold substantial amounts of cryptocurrencies and related products until there is clarity regarding how such funds could satisfy certain requirements of the Investment Company Act of 1940, as amended, and its related rules (collectively, the "1940 Act"). In the Staff Letter, Director Blass identified several key questions intended to "facilitate the start" of a dialogue between fund sponsors and the SEC Staff, stating, "we invite you and any interested sponsors to engage with us in detail on these [issues]."
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