The cryptocurrency has drawn the attention of regulators globally as a result of volatile price movements, from Bitcoin and Ether to the Shiba Inu.
The Financial Conduct Authority is proposing to restrict the trading of cryptocurrency assets to wealthy and experienced investors only, as part of a broader push to strengthen consumer protection around high-risk investments. The British watchdog said in a statement on Wednesday that it plans to categorize qualifying crypto assets as โrestricted mass market investments.โ That means consumers โmight only respond to crypto asset financial promotions if they are classified as restricted, high net worth, or sophisticated investors.โ
The proposal comes after the Treasury said on Tuesday that it planned to tighten rules on cryptocurrency advertising to ensure promotions are "fair, clear and not misleading." Crypto has drawn the attention of regulators globally as a result of volatile price movements in digital assets, from Bitcoin and Ether to memecoins like Shiba Inu, as well as product complexity and lack of consumer protection.
The FCA is seeking comment on its proposals before March 23 and intends to confirm its final rules in the summer.
Biggest Bitcoin Fund Sinks Near 30% Off Crypto Route
(Bloomberg) One of the biggest victims of the cryptocurrency selloff is Grayscale Bitcoin Trust.
The $27 billion fund (ticker GBTC) has plunged nearly 17% so far in 2022, outpacing Bitcoin's nearly 9% drop. As a result, the price of GBTC closed 26.5% below the value of the Bitcoin it owns on Tuesday, widening GBTC's so-called discount to record levels, according to data from Bloomberg.
It's a dynamic that has plagued GBTC for months. The trust does not allow the redemption of shares in the same way as an exchange-traded fund, which means that the supply of shares cannot be created and destroyed with changing demand. As a result, stocks fell sharply as investors retreated sharply from cryptocurrencies, exacerbating the share price discount.
Grayscale Investment LLC applied to the Securities and Exchange Commission in October to convert GBTC into an ETF, which is expected to quickly redress the discount, but regulators have yet to approve a physically-backed Bitcoin fund.
โGBTC continues to break hearts as the discount widens,โ Brent Donnelly, president of Spectra Markets, wrote in a report. โGBTC is basically a binary bet on a physical ETF at the moment. Tempting but tempting in the way that value traps can be tempting.โ
GBTC first fell at a discount last February as the number of shares outstanding soared, after years of trading at a premium to Bitcoin. However, the launch of Canadian Bitcoin ETFs and the first US derivative-backed Bitcoin ETFs eroded GBTC's competitive advantage. Grayscale's parent company, Digital Currency Group, has tried to repair the discount by buying back shares of GBTC.
The price of GBTC has dislocated from Bitcoin to an even greater degree than the ProShares Bitcoin Strategy ETF (BITO), which is vulnerable to tracking errors given that it holds futures contracts. While Bitcoin was up 1.6% on Tuesday, BITO and GBTC were down 3.3% and 6.4%, respectively.
