On January 18, 2018, in a letter to the Investment Company Institute and SIFMA, Dalia Blass, Director of the SEC’s Division of Investment Management, warned market participants against the risks of creating and marketing investment products to retail investors that hold “substantial amounts” in “cryptocurrencies and related products.” The risks/concerns posed by cryptocurrency ETFs and funds, including transparency of information, trading, valuation and custody, were highlighted.

Also, on January 19, 2018, SEC Co-Enforcement Directors Stephanie Avakian and Steven Peikin and CFTC Enforcement Director James McDonald issued the following Statement:

“When market participants engage in fraud under the guise of offering digital instruments – whether characterized as virtual currencies, coins, tokens, or the like – the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws. The Divisions of Enforcement for the SEC and CFTC will continue to address violations and bring actions to stop and prevent fraud in the offer and sale of digital instruments.” Release.