Photo by Alesia Kozik
The U.S. Securities and Exchange Commission (SEC) has officially approved Bitcoin exchange-traded funds (ETFs), marking a significant development in the cryptocurrency landscape.
The SEC said it gave the green light to 11 exchange-traded funds for bitcoin even though it only faced a deadline for one application. The agency said that would provide competition and a “level playing field,” Coin Desk reported.
Since 2021, Bitcoin Strategy ETF (BITO) has been trading, but it holds futures related to bitcoin, not the cryptocurrency itself.
A spot Bitcoin ETF pools investor money to purchase Bitcoin directly. A Bitcoin ETF is managed by an investment firm and listed on a traditional stock exchange, Bankrate reported. ETFs are “exchange-traded” and can be bought or sold intraday at different prices.
Here are five things to know.
The approval comes after more than a decade of efforts by the asset management industry to launch spot Bitcoin ETFs. This move is expected to attract a broader range of investors to the 15-year-old cryptocurrency, providing easier access to the digital asset.
Following the SEC’s decision, Bitcoin’s price surged past $47,500. The approval is seen as a positive signal for the entire cryptocurrency market.
About a dozen prominent companies, including BlackRock, Fidelity, and Grayscale, sought approval to create spot Bitcoin ETFs. These differ from previously approved Bitcoin futures ETFs, as spot ETFs hold actual Bitcoin rather than derivatives contracts tied to BTC. The competition among these companies has led to announcements and adjustments in fees, indicating a fierce battle for investor funds.
Spot bitcoin ETFs hold bitcoins in a secure digital vault. The purpose of this kind of ETF is to mirror the price of bitcoins in the crypto market, according to Investopedia.
A bitcoin futures exchange-traded fund (ETF) issues publicly traded securities that offer exposure to the price movements of bitcoin futures contracts, according to the Commodity Futures Trading Commission.
SEC Chair Gary Gensler, who has been skeptical about cryptocurrencies, explained that a court loss in 2023 influenced the decision. The court ruled that the SEC had been “arbitrary and capricious” in rejecting Grayscale’s attempt to convert its Bitcoin Trust into a spot ETF. Gensler stated that approving spot Bitcoin ETFs is the most sustainable path forward based on recent circumstances.
In August, the D.C. Circuit Court of Appeals ruled the SEC was “arbitrary and capricious” in its decision to reject Grayscale’s attempt to convert its roughly $26 billion Grayscale Bitcoin Trust (GBTC) into a spot ETF, Coin Desk reported.
“The U.S. Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order). The court therefore vacated the Grayscale Order and remanded the matter to the Commission. Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares,” Gensler said.
While the approval signals a win for the cryptocurrency industry, not all SEC commissioners were on board. Commissioner Caroline Crenshaw dissented, expressing concerns about the safety of the Bitcoin spot market from fraud or manipulation.
“I am concerned that these products will flood the markets and land squarely in the retirement accounts of U.S. households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets,” Commissioner Caroline Crenshaw said in her dissent, Time reported.
Also, longtime crypto fans might be against the move. Cryptocurrencies like bitcoin were created in part due to mistrust of the traditional financial system, Time reported.
Photo by Alesia Kozik: https://www.pexels.com/photo/gold-coins-on-the-laptop-6770845/
