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SEC Approves New Bitcoin ETFs, in Boon for Crypto Industry
Federal regulators approved a new financial product on Wednesday which tracks the price of Bitcoina landmark moment for the cryptocurrency industry that supporters hope will boost investment in the technology.
The Securities and Exchange Commission authorized 11 questions offer Bitcoin-linked exchange-traded funds, a potentially easier way for people to invest in digital assets. Some of the world’s largest financial firms, including asset managers BlackRock and Fidelity, have been authorized to offer products, known as ETFs, that could begin trading as early as Thursday on traditional platforms such as Nasdaq.
The approvals were welcomed as a sign that major financial institutions remain willing to trade in digital currencies even after 18 months of market crashes and high profile failures. Since the fall, Bitcoin’s price has risen more than 60%, as traders bet that approval of new crypto products would give the sector an imprimatur of regulatory legitimacy, attracting new investments from professional asset managers and amateur traders.
The price of Bitcoin increased on Tuesday after a the post appeared on the SEC’s official X account announcing the approval of ETFs, but was quickly abandoned when Gary Gensler, the SEC chairman, claimed that the agency’s account had been hacked.
Cryptocurrency enthusiasts only had to wait until Wednesday, when the SEC cleared the products in a regulatory filing. The price of Bitcoin increased slightly following the announcement.
In a statement, Gensler, a fierce critic of fraud and volatility in cryptocurrency markets, said the approvals should not be interpreted as an endorsement of the technology. “We have not endorsed or supported Bitcoin,” he said. “Investors should remain cautious regarding the myriad of risks associated with Bitcoin and products whose value is tied to cryptocurrencies.”
However, the long-awaited approvals bring a pillar of the traditional financial system into the experimental world of digital money.
Widely offered by financial firms such as Charles Schwab and Vanguard, ETFs are baskets of assets divided into stocks that can be bought and sold on the open market, a form of investment popular among asset managers who control trillions of dollars of capital.
Instead of holding Bitcoin in online wallets, Bitcoin ETF investors would own shares of funds containing the digital currency. Investors would get exposure to the market without some of the risks and inconveniences historically associated with cryptocurrencies, a loosely regulated technology that allows people to trade digital funds outside the supervision of banks or other traditional intermediaries.
“It creates a bridge to the traditional financial market,” said James Seyffart, a Bloomberg Intelligence analyst who tracks ETFs. “Long term, I think the money will come.”
Cryptocurrency advocates have been pushing for the introduction of a Bitcoin ETF for years, hoping it would accelerate the adoption of cryptocurrencies more broadly. In 2021, the SEC approved funds that track Bitcoin’s fluctuations without holding the currency itself. But the agency argued that a fund containing Bitcoin would pose major risks to consumers, citing illegal manipulation of cryptocurrency prices, among other issues.
Those arguments failed in court. In August, the SEC lost a legal battle with cryptocurrency manager Grayscale Investments, one of the firms that applied to offer the product, paving the way for a Bitcoin ETF
The price of Bitcoin soon skyrocketed and this month reached nearly $47,000, its highest value since a series of bankruptcies sent the sector into crisis. a meltdown in 2022.
Speculation was raging on social media about the timing of the SEC approval. Tuesday’s fake announcement sparked 15 minutes of celebration before Gensler weighed in on X. An official X account for the platform’s security assets She said the agency had not enabled two-factor authentication, a common digital security tool, to protect their account.
Anticipation for new crypto products had been building for months. In November, BlackRock filed paperwork to create an ETF that would track the price of Ether, the second most valuable cryptocurrency after Bitcoin, sparking further excitement.
But skeptics argued that the new products would not solve any of cryptocurrencies’ fundamental problems, such as fraud and volatility. A market crash in 2022 has drained the savings of millions of ordinary investors. Critics have said that many crypto companies don’t offer much practical utility.
In a public letter last week, the nonprofit advocacy group Better Markets She said approving Bitcoin ETFs would be a “historic mistake that would almost certainly lead to serious harm for investors.” Others argue that the products will not increase cryptocurrency prices much.
The growing prominence of companies like BlackRock in the cryptocurrency world also runs counter to the renegade industry’s initial promise to provide an alternative to traditional financial giants.
“There is so much irony and hypocrisy,” said John Stark, a former SEC official and longtime critic of cryptocurrencies.
In his statement Wednesday, Gensler said the August court ruling made the approval of ETFs “the most sustainable path forward.” But he said the decision “should in no way” signal that the SEC is willing to allow similar products tied to other cryptocurrencies. He called Bitcoin a “speculative and volatile asset” used in money laundering, terrorist financing and other crimes.
Still, the industry celebrated.
“Today will be remembered in the history of cryptocurrencies,” said Richard Teng, CEO of Binance, the world’s largest cryptocurrency company. published on X.
Brad Garlinghouse, CEO of cryptocurrency company Ripple, She said on X that “the significance of this moment cannot be overstated.” He added: “Today’s news is further legitimization of cryptocurrencies as an asset class.”
Companies licensed to offer Bitcoin ETFs, including Grayscale, Franklin Templeton and many others, have already started competing for customers. Some of them changed the management fees they plan to charge for Bitcoin ETFs this week, seeking to undercut the competition. Black rock lowered its commission from 0.3% to 0.25%.