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Statement on Order of Suspension of Trading of Certain Bitcoin/Ether Tracking Certificates

Division of Trading and Markets and Division of Corporation Finance

Sept. 20, 2018

On September 9, 2018, the Securities and Exchange Commission ("SEC") determined that the lack of current, consistent and accurate information concerning Bitcoin Tracker One (Ticker Symbol: CXBTF) and Ether Tracker One (Ticker Symbol: CETHF) (together, the “Certificates”) issued by XBT Provider AB, a Swedish company headquartered in Stockholm, resulted in confusion amongst market participants regarding the Certificates.  For example, the broker-dealer application materials submitted to enable the offer and sale of the Certificates in the United States, as well as certain trading websites, characterize them as “Exchange Traded Funds.” Other public sources characterize the Certificates as “Exchange Traded Notes.” By contrast, the issuer characterizes them in its offering materials as “non-equity linked certificates.” CXBTF and CETHF are listed and trade on the NASDAQ/OMX in Stockholm and have recently been quoted on OTC Link (previously “Pink Sheets”) operated by OTC Markets Group, Inc.

Market participants seeking to quote, trade or facilitate transactions in the Certificates are cautioned to analyze the legal and regulatory implications and consequences of doing so, including under the federal securities laws and the Commodity Exchange Act ("CEA"). For example, before seeking to recommence quoting or trading in the Certificates, the staff would expect that a broker-dealer’s legal analysis, including under Exchange Act Rule 15c2-11 would, at minimum, address the issues raised in the suspension order, including providing a reasonable basis for a conclusion that the Certificates can appropriately be quoted or traded in United States markets. The issuer’s public disclosures specifically note that the Certificates are non-equity linked Certificates and note that the value of and any amounts payable under the Certificates will be strongly influenced by the performance of the referenced digital assets (Bitcoin or Ether). The disclosures state that the issuer is a special purpose vehicle that does not intend to engage in any other business activities. The publicly posted terms of the Certificates state that they do not bear interest, are not principal-protected and have no scheduled maturity date.  The posted terms use a notional amount of the Certificates for purposes of calculating payments. The payout of the Certificates is described as calculated with reference to Bitcoin/Ether prices in relation to USD, which “causes a so-called synthetic exposure” to Bitcoin/Ether and USD. SEC staff is consulting with Commodity Futures Trading Commission ("CFTC") staff with respect to the regulatory considerations applicable to the Certificates under the CEA. Under the comprehensive framework for regulating swaps and security-based swaps established in Title VII of the Dodd-Frank Act, the CFTC is given regulatory authority over swaps and the SEC is given regulatory authority over security-based swaps.

This statement represents the views of the Divisions of Trading and Markets and Corporation Finance.  It is not a rule, regulation or statement of the Securities and Exchange Commission (the "Commission").  Further, the Commission has neither approved nor disapproved its content.

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