The CNMV warned that investing in the cryptocurrency market entails “high risk” due to a speculative component. They established that collective investment institutions will be able to have exposure to Bitcoin and other cryptocurrencies through derivatives.
In recent days, the National Securities Market Commission (CNMV) of Spain authorized funds from that country to invest in Bitcoin. However, the agency warns that this is a market that involves many risks.
A document that the CNMV published on May 7th indicates that the investments will have the approval of the agency. To this end, there must be a daily negotiation “to determine the market price from the sale and purchase operations that third parties conduct.”
As there is no underlying limitation, the Spanish regulator also made decisions on collective investment institutions (IIC). They established that the latter will be able to have exposure to Bitcoin and other cryptocurrencies through derivatives.
That will only be possible if “the settlement of the derivative does not mean delivering the cryptocurrency.” However, the text highlights that “it is only possible for these IICs to trade with professional investors.”
The Commission said that IICs may not invest in funds that “do not include an embedded derivative.” In that way, they refer to traded commodity exchanges (ETC), a variation of ETFs that replicate the behavior of a commodity. Likewise, they mention traded note exchanges (ETNs), which offer another form of investment similar to that of a listed fund, but assuming the additional risk of the issuer.
The CNMV Considers that Investing in Bitcoin Entails High Risk
Despite authorizing investments in cryptocurrencies, the CNMV warns that investments in that market are “highly risky.” They argue that the prices of crypto assets have a “high speculative component.”
On the one hand, they note that the key investor information (DFI) document should mention exposure to cryptocurrencies. On the other hand, they warn about the “risks that this may involve, including specific risks to their price formation.”
There is suspicion on the part of the Spanish authorities regarding cryptocurrencies such as Bitcoin, which they have repeatedly demonstrated. At the end of January, the Bank of Spain said that Bitcoin and other cryptocurrencies present themselves as an alternative to money. However, they warned that “[cryptocurrencies] do not have the support of a central bank or another public authority.”
The financial institution stated that price changes are not “always transparent”, so it is possible to “manipulate” them. This also happens among regulators in other countries like the United States and China, whose regulators are against decentralized cryptocurrencies.
The Commission Consults Spaniards about the Advertising of Bitcoin
The National Securities Market Commission (CNMV) of Spain has announced the possible risks of investing in Bitcoin and other cryptocurrencies. Likewise, they have set their sights on the advertising of Bitcoin in the European country.
In April, the agency initiated a round of public consultations to regulate the advertising of Bitcoin and other cryptocurrencies in Spain. They directed the initiative at professionals in the sector, consumers, and investors.
By Alexander Salazar