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SEC Approves Spot Bitcoin ETFs for Trading in…
The US Securities and Exchange Commission (SEC) has approved 11 Bitcoin spot exchange traded funds (ETFs) in a “watershed” moment for cryptocurrency investing, documents posted on its website late Tuesday show. ETFs can start trading as early as today, Thursday.
Arrives just 24 hours later the SEC issued an “unauthorized” endorsement on X (formerly Twitter), which SEC Chairman Gary Gensler later said was the result of a person or entity “compromising” the account.
The decision ends a decades-long battle over listing exchange-traded bitcoin products on national exchanges and could serve as a boon to the price of the world’s most popular digital asset.
According to data from CoinDesk, Bitcoin (BTCUSD) remained largely stable at around $46,742 following the SEC announcement. The price briefly rose 2% after the fake tweet, before falling again.
The approved ETFs are Grayscale Bitcoin Trust GBTC, Bitwise Bitcoin ETF, Hashdex Bitcoin ETF, iShares Bitcoin Trust by Blackrock, Valkyrie Bitcoin Fund, ARK 21Shares Bitcoin ETF, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree Bitcoin Fund, Fidelity Wise Origin Bitcoin Fund and Franklin Bitcoin ETF.
Bitcoin spot: years of attempts
The approval follows years of failed attempts by ETF sponsors to list a spot Bitcoin product. Regulators have repeatedly blocked this move, arguing that the markets on which Bitcoin trades are so unregulated and vulnerable to manipulation that average investors cannot be protected from fraud. A decision on spot Bitcoin ETFs was, however, expected this week, expiring on Wednesday.
Last August a federal judge ruled that the SEC’s reasons for rejecting Grayscale Investments’ request to list a bitcoin ETF were “arbitrary and capricious” and in violation of federal administrative law.
In the ruling, the judge argued that the SEC’s decision to approve two Bitcoin futures funds but deny a spot Bitcoin ETF was a violation of the legal principle that agencies “must treat similar cases equally” because prices in the Bitcoin futures market closely followed those of its futures. spot market counterparty.
The SEC had first approved a Bitcoin futures ETF in late 2021, arguing that Bitcoin spot markets could not be sufficiently monitored to prevent fraud, while Bitcoin futures markets were overseen by registered futures exchanges with sophisticated surveillance capacity.
Why did the SEC change its mind on a spot ETF?
In announcing this latest decision, Gensler pointed to the court ruling as the reason the commission reversed its position, saying that “circumstances have changed” and that the agency’s previous rationale for blocking the ETF was no longer sufficient .
“Based on these circumstances (…) I believe the most sustainable path forward is to approve the listing and trading of these spot Bitcoin ETFs,” he said.
However, he also said that the decision will lead to a general policy of product approval.
“Today’s Commission action affects ETPs that hold a non-securities-related asset: Bitcoin,” Gensler said.
“This should in no way signal the Commission’s willingness to approve listing standards for cryptocurrency securities.”
Nor does the decision “signal anything” about the Commission’s position on cryptocurrencies more broadly, he said, or the “current state of noncompliance of some cryptocurrency market participants with federal securities laws.”
Expect a reaction to the SEC green light
The development has been met with a mixture of praise and alarm.
Yoni Assia, CEO and co-founder of trading platform eToro, says it’s a watershed moment for Bitcoin investors.
“The term ‘watershed moment’ may be a cliché, but in the case of today’s Bitcoin ETF news, it couldn’t be more justified,” he says.
“Today’s news provides an answer to institutional demand for Bitcoin. It is good news for the cryptocurrency markets and supports our belief that Bitcoin is an unstoppable technology. It is digital gold, and from a long-term view, I believe it represents the intersection of finance, economics and technology.
“For our users, retail investors, today’s news is positive as it will support the growth of Bitcoin as an asset class, but I believe most ordinary investors will want to continue buying and holding real Bitcoin.”
Will there be Bitcoin ETFs in the UK?
However, Jason Hollands, chief executive of retail investment platform Bestinvest, warns that Bitcoin enthusiasts among the UK’s nine million self-directed investors may wait a while if they want a similar move in the UK.
“The Financial Conduct Authority (FCA) has repeatedly raised concerns about the extreme volatility of cryptocurrencies, the high risk of losses and the difficulties retail investors face in valuing them,” it says.
“For an ETF to be made directly available from a regulated investment platform in the UK, under a regulation known as a “PRIIP”, the ETF and other fund providers must comply with UK regulatory requirements in terms of producing a key disclosure document, which a U.S.-listed ETF will not have.”
If similar ETFs were authorised in the UK, he adds, it is possible they would be made available only to professional investors, due to the FCA’s introduction of Consumer Duty last year, which aims to increase protection for consumer investors.
And Laith Khalaf, head of investment analysis at retail platform AJ Bell, is also skeptical about the timing and likelihood of this happening here: “Although even with SEC approval, it’s not a fluke that we will get one here because the UK regulator may not approve their sale.”
It explains the technical reasons why UK investors are not allowed to buy US ETFs, such as the lack of a key investor document and the FCA’s 2021 ban on Exchange Traded Notes (ETNs) containing “unregulated transferable cryptoassets”.
“However, the UK regulatory landscape is also changing, with crypto assets brought under the supervision of the FCA, so this could pave the way for crypto ETFs in the future. Whether and when this might happen is anyone’s guess. The FCA is walking a tightrope between consumer safety and the government’s ambition to make the UK a global hub for cryptoasset technologies.”
But he argues that investment managers are still interested in packaging Bitcoin ETFs into an investor product due to high consumer demand.
Morningstar’s Sunniva Kolostyak contributed to this story