On May 11, 2021, SEC’ Division of Investment Management Staff (‘IM staff’) issued a Statement “Funds Registered Under the Investment Company Act Investing in the Bitcoin Futures Market.” warning retail investors about certain risks associated with investing in mutual funds whose portfolios include Bitcoin futures.

The statement reminds retail investors interested in such products to consider:

• Their own risk tolerance.

• The risk disclosure of the fund.

• The possibility of loss.

• The volatility of Bitcoin and the Bitcoin futures market as well as the lack of regulation of this market.

IM staff, with collaborate with other Divisions to monitor the impact of mutual funds’ investments in Bitcoin futures in order to

• Analyze the liquidity and depth (e.g., number of participants) of the Bitcoin futures market.

• Analyze mutual funds’ ability to liquidate Bitcoin futures positions as necessary to meet daily redemption demands, as well as the efficacy of mutual funds’ derivatives risk management.

• Monitor funds’ valuations of holdings in the Bitcoin futures market and consider the impact of mutual fund participation in the Bitcoin futures market on valuations in that market, as well as the impact on valuation of any disruptions in the underlying Bitcoin markets.

• As part of funds’ compliance with the open-end fund liquidity rule, consider mutual funds’ liquidity classification of any position in the Bitcoin futures market and the basis for such classification and also consider the overall construction of a fund’s liquidity risk management program.

• Assess the ongoing impact of the potential for fraud or manipulation in the underlying Bitcoin markets and its possible influence on the Bitcoin futures market.

• Consider whether the Bitcoin futures market could accommodate ETFs.