The highly anticipated funds could begin trading as soon as Thursday after the agency approved rule changes that allow them to list.
The SEC for years had rejected Bitcoin ETFs, arguing that there was insufficient surveillance for fraud and manipulation in the markets that trade Bitcoin. However a federal appeals court last year said that the SEC acted arbitrarily and capriciously in denying the conversion of the
Grayscale Bitcoin Trust
into an ETF, vacating their denial.
In a statement, SEC Chair Gary Gensler said the approval of the spot Bitcoin funds was the “most sustainable path forward” in light of the court loss.
“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,” Gensler said in the statement.
Gensler also noted that while the SEC has approved commodity ETFs, Bitcoin is far different, saying it is “primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.”
The SEC’s approval includes nearly a dozen funds to be offered by major ETF issuers including
BlackRock,
Fidelity, and Invesco, as well as niche companies including Bitwise Asset Management, Ark Invest, and 21Shares.
Bitcoin proponents say the new funds could bring in tens of billions of dollars in assets as institutional investors and financial advisors get an easy and cheap way to access the cryptocurrency for the first time. Analysts from bank Standard Chartered, for example, before the approvals this week said they expected the products could bring in between $50 billion and $100 billion this year.
Such inflows could have a huge market impact on Bitcoin, which as of Wednesday afternoon had a market capitalization of around $900 billion.
Still, the SEC’s approval after the court loss was highly anticipated. Perhaps as a result, the crypto’s price barely budged after the official announcement on Wednesday.
As of 5:08 p.m. ET on Wednesday, Bitcoin traded at $45,846, down 0.6% over the past 24 hours.
Fund issuers say the real impact of the ETFs will be longer term. Many institutional investors and financial advisor platforms, for example, require a vetting process before adding funds to their portfolios, meaning that it could be several weeks before such investors can use them en masse.
“We’re talking about unlocking an amount of wealth that is measured in trillions of dollars,” said ARK Invest Chief Operating Officer Tom Staudt, who company is co-sponsoring an ETF that was approved with 21Shares. In institutions’ portfolios, Bitcoin has “effectively been segregated from the rest of the wealth.”
The approvals could have other beneficial impacts for Bitcoin traders.
Over the past several days, issuers had already engaged in a fee war, lowering proposed fees in attempts to undercut one another. As of Wednesday afternoon, Bitwise said its fund would carry an expense ratio of 0.20%, while Ark and 21Shares said their co-sponsored fund would charge 0.21%. Funds from BlackRock and Fidelity proposed a 0.25% fee. Bitwise, ARK and 21Shares, Fidelity and others said they would temporarily waive annual fees completely for a period of time or amount of assets under management.
The low fees, along with zero-fee commissions already offered on platforms like
Robinhood Markets,
could make the new funds the cheapest place to buy Bitcoin for many investors, beating traditional crypto trading platforms like Coinbase.
The process by which the Bitcoin ETFs were ultimately approved was a black-eye for Gensler’s SEC. On Tuesday, someone compromised the SEC’s official account on X, the site formerly called Twitter, and falsely posted that the ETFs had been approved. The false post, which the SEC said it’s investigating along with the Federal Bureau of Investigation, cause Bitcoin’s price to gyrate and led a few lawmakers to say they would also ask for answers from Gensler.
Then on Wednesday, the rule change marking the approval of the ETFs briefly appeared on the SEC’s website only to be taken down moments later, leaving ETF watchers to wonder if the approval was official. Finally the SEC reposted the document, along with the statements from Gensler and other commissioners.
The SEC did not immediately respond to a request for comment on why the rule change was removed and reappeared.
An X account Tuesday evening said its own preliminary investigation found that Tuesday’s compromise was due to someone getting control of a phone number associated with the account rather than a breach of X’s own systems. The SEC didn’t have two-factor authentication enabled at the time of the compromise, X said.
After a blowout 2023 that saw Bitcoin prices more than double, the flagship digital asset has gained almost 10% more since the start of 2024. Gains have been supercharged by limited token supply, with much of the Bitcoin in circulation held by long-term investors that have proved unwilling to sell.
Despite Gensler’s warnings, Crypto executives, including Binance CEO Richard Teng, in statements quickly touted the SEC approvals as a seal of credibility for the industry and proof that digital assets have gone mainstream. Binance itself last year was sued by the SEC for allegations that included operating an unregistered securities exchange, which Binance denies.
Some of crypto’s detractors are warning that Bitcoin ETFs may only perpetuate an asset and industry with a shady past and plenty of ongoing illicit uses.
In a dissenting statement, SEC Commissioner Caroline Crenshaw called the approvals “unsound and ahistorical.”
“They put us on a wayward path that could further sacrifice investor protection. I cannot agree that these actions serve either our statutory or foundational investor protection mandates,” Crenshaw said.
Corrections & Amplifications: An X account on Tuesday evening detailed the results of the company’s preliminary investigation into how the SEC’s X account was compromised. An earlier version of this article incorrectly said the X account posted on Wednesday evening.
Write to Joe Light at [email protected] and Jack Denton at [email protected]
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