The Securities and Exchange Commission said it approved applications from BlackRock, Grayscale, Ark Investments/21Shares, Fidelity, Invesco and VanEck among others, despite the regulator’s risk warnings of the asset.
The move was long awaited by the cryptocurrency community, which has seen previous attempts to launch this style of product shot down by the regulator.
In a statement, SEC chair Gary Gensler addressed the failed submission for 20 bitcoin trackers last year, which he said were likened to the now approved applications materially.
However, he said that “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”.
Treasury finalises plans to regulate crypto industry
Gensler said that the SEC was “merit neutral” when it comes to particular companies and assets, but he still warned about the risks of cryptocurrencies.
“Though we are merit neutral, I would note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that is also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing,” he said.
Gensler continued: “While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin.
“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
The announcement came after a tumultuous 24 hours for bitcoin, after a tweet sent from the SEC’s account announced the approval of the ETFs the day prior (9 January), causing the price of bitcoin to spike by more than $1,000.
Four potential ‘black swans’ for 2023
Soon after, the SEC said its account had been “compromised” and that the tweet was “unauthorised”, only to be followed by the official approval announcement the following day.
Commenting on the ETF approval, Yoni Assia, CEO and co-founder of eToro, said: “The term ‘watershed moment’ can be a cliche, but in the case of today’s bitcoin ETF news, it could not be more justified.”
He said: “For 15 years, bitcoin has been growing in prominence as an asset class amongst retail investors, while in a reversal of traditional roles, institutional investors have remained largely on the sidelines waiting for traditional finance rails to be put in place.
Bob Jenkins, global head of research at LSEG Lipper, noted that today’s approval for spot products may represent an “enhanced level” of organised oversight and transparency to this asset class, “so will likely benefit investors”.
Attention has now turned to the UK regulators on whether it will follow in the SEC’s footsteps, but Jason Hollands, managing director at Bestinvest, was not optimistic on that path.
US court rules SEC improperly rejected bitcoin spot ETF
“I am personally doubtful that the UK’s Financial Conduct Authority will authorise Bitcoin or other cryptocurrency ETFs to be made accessible to UK retail investors any time soon,” he said.
“The FCA has repeatedly flagged concerns about the extreme volatility of crypto-assets, the high risk of losses and the difficulties retail investors face in valuing them.
“For an ETF to be made directly available by a UK regulated investment platform, under a regulation known as PRIIPs (Packaged Retail and Insurance-based Investment Products Regulation) ETF and other fund providers must comply with UK regulatory requirements in terms of producing a Key Information Document, which a US-listed ETF will not have.”
He said that if similar products were commissioned in the UK, they would likely only be available to professional investors such as discretionary fund managers or those certified as sophisticated investors as the FCA’s Consumer Duty could clash with this type of high-risk product.
