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DIM Focuses on Compliance and Disclosures as Funds Dip Into Bitcoin Futures

24 May 2021

Kelley Howes spoke to Fund Directions about the U.S. Securities and Exchange Commission’s (SEC) Division of Investment Management issuing a statement that provides guidelines for advisers and boards of registered funds seeking to gain exposure to the Bitcoin futures market, detailing plans to closely monitor their compliance with the Investment Company Act and federal securities law.

“The SEC has come out and said that Bitcoin…cannot be a core holding for a mutual fund because it is not a security,” Kelley said. “That is why the Bitcoin futures market exists, because you can use futures to access Bitcoin.”

Kelley added that directors of any funds gaining exposure to cryptocurrency-related markets should carefully assess concerns around liquidity, valuation and custody as mutual funds must maintain liquidity to meet daily redemptions. Directors may also want additional presentations from the custodian and the administrator in charge of the liquidity risk management program. “They’ll want to make sure that the person understand where this type of security is going to be bucketed,” she said. “Is it illiquid? Or is it low liquidity, or do you think it is fully liquid?”

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