Today in crypto: The SEC has issued warning letters to asset managers over leveraged ETFs offering more than 200% exposure to underlying assets. Binance has named co-founder Yi He as co-CEO, and the United Kingdom has passed legislation clarifying how property rights apply to crypto.
SEC sends warning letters to ETF issuers targeting untamed leverage
The US Securities and Exchange Commission (SEC) sent warning letters to several exchange-traded fund (ETF) providers, halting applications for leveraged ETFs that offer more than 200% exposure to the underlying asset.
ETF issuers Direxion, ProShares, and Tidal received letters from the SEC citing legal provisions under the Investment Company Act of 1940.
The law caps exposure of investment funds at 200% of their value-at-risk, defined by a “reference portfolio” of unleveraged, underlying assets or benchmark indexes. The SEC said:
“The fund’s designated reference portfolio provides the unleveraged baseline against which to compare the fund’s leveraged portfolio for purposes of identifying the fund’s leverage risk under the rule.”
The SEC directed issuers to reduce the amount of leverage in accordance with the existing regulations before the applications would be considered, putting a damper on 3-5x crypto leveraged ETFs in the US.
SEC regulators posted the warning letters the same day they were sent to the issuer, in an “unusually speedy move” that signals officials are keen on communicating their concerns about leveraged products to the investing public, according to Bloomberg.
The crypto market took a nosedive in October after a flash crash caused $20 billion in leveraged liquidations, the most severe single-day liquidation event in crypto history, sparking discussions among analysts and investors over the dangers of leverage and its effect on the crypto market.
Binance names co-founder Yi He co-CEO alongside Richard Teng
Binance appointed co-founder Yi He as co-CEO, elevating one of its earliest architects to a formal leadership role alongside chief executive Richard Teng.
In a Wednesday announcement on stage at Binance Blockchain Week, Teng said co-founder Yi He had been appointed co-CEO. Teng said He “has been an integral part of the executive leadership team since the launch of Binance,” calling the appointment “a natural progression.”
Teng added that He, Binance’s chief marketing officer before her appointment as co-CEO, is crucial in expanding Binance’s community and driving product innovation. Yi He said that sharing the CEO role with Teng will leverage two very different perspectives, with Teng bringing his experience in regulated financial markets.
Yi He is a crypto native who co-founded Binance in 2017 alongside Changpeng “CZ” Zhao.
UK takes “massive step forward” in property laws for crypto
A UK bill that clarifies that digital assets, such as cryptocurrencies and stablecoins, are property was given royal assent and passed into law on Tuesday, which advocates say will better protect crypto users.
King Charles gave his approval to the Property (Digital Assets etc) Bill, which clarifies that “a thing that is digital or electronic in nature” isn’t outside the realm of personal property rights just because it doesn’t fit under the law’s two categories of personal property, covering tangible and intangible goods.
UK common law established that digital assets are property, but the bill sought to codify a recommendation made by the Law Commission of England and Wales in 2024 that crypto be categorized as a new form of personal property for clarity.
Freddie New, policy chief at advocacy group Bitcoin Policy UK, said that the bill “becoming law is a massive step forward for Bitcoin in the United Kingdom and for everyone who holds and uses it here.”
The advocacy group CryptoUK said the law “gives digital assets a much clearer legal footing” for things like proving ownership and recovering stolen assets. It added that the law gives “greater clarity and protection for consumers and investors” and gives crypto holders “the same confidence and certainty they expect with other forms of property.”
