In letters to industry groups SIFMA and the ICI, the Director of the SEC’s Investment Management Division posed several questions on 1940 Act requirements and the implications for funds intending to hold cryptocurrency or related products. The topics included valuation, liquidity, custody and potential for manipulation and other risks. According to the letter, until the questions raised by the IM chief can be addressed satisfactorily, “…we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products, and we have asked sponsors that have registration statements filed for such products to withdraw them.”Meanwhile, FINRA wrote in its 2018 Exam Priorities letterthat it will closely monitor developments in digital assets (such as cryptocurrencies) and initial coin offerings, including the role firms and registered representatives may play in effecting transactions in such assets and ICOs. FINRA said it may review the mechanisms—for example, supervisory, compliance and operational infrastructure— firms have put in place to ensure compliance with relevant federal securities laws and regulations and FINRA rules where such assets are securities or where an ICO involves the offer and sale of securities. The North American Securities Administrators Association (NASAA) also warned investors to be cautious about investments involving cryptocurrencies. In December, SEC Chairman Jay Clayton, who recently echoed the NASAA statement and reiterated past warnings on cryptocurrencies, urged investors and firms advising clients about digital assets to exercise caution and to consider existing laws and regulations. Meanwhile, Reutersreported that five fund managers recently withdrew filings or abandoned plans to launch ETFs based on bitcoin futures because of regulatory concerns.