The U.S. Securities and Exchange Commission on Wednesday approved rule changes that will allow the creation of bitcoin exchange-traded funds in the U.S., a long-awaited move that will give investors regular access to the controversial and volatile cryptocurrency.
The decision is likely to lead to the conversion of Grayscale Bitcoin Trust, which holds about $29 billion in cryptocurrency, into an ETF, as well as the launch of competing funds from major issuers such as BlackRock’s iShares and Fidelity. The first funds can start trading on Thursday.
The approval could prove to be a watershed event in mainstream finance’s adoption of the cryptocurrency, as the ETF structure provides institutions and financial advisors with a familiar and regulated way to purchase exposure to Bitcoin.
“We think the SEC approval, if we and others get it, is a green light for institutions. We’ve talked to a lot of them, and they’re more interested now that the SEC is effectively paving the way.” Ark Invest CEO Cathie Wood said on CNBC’s “Halftime Report” on Monday. Ark Invest has partnered with 21Shares on a proposed Bitcoin fund.
The decision comes after the SEC’s official social media account falsely reported on Tuesday that bitcoin ETFs had been approved. The SEC said the account was compromised.
The regulator has opposed the so-called spot bitcoin fund for years, with several firms in the past filing and then withdrawing ETF applications. SEC Chairman Gary Gensler has been an outspoken critic of cryptocurrencies during his tenure.
But the regulator appears to have reversed course on ETFs in 2023, perhaps in part because of its August loss to Grayscale in a court ruling that criticized the SEC for blocking bitcoin ETFs while allowing funds that track bitcoin futures.
“Importantly, today’s Commission action is related to ETPs that hold one unsecured commodity, bitcoin. This should in no way signal the Commission’s willingness to approve crypto-asset securities listing standards. The approval also does not indicate anything about the Commission’s views on the status of other crypto-assets under federal securities laws or the current state of non-compliance of certain crypto-asset market participants with federal securities laws,” Gensler said in a statement Wednesday.
Optimism about the approval first emerged this year after asset management giant BlackRock filed in June, prompting a flood of applications from its rivals. The Ark Invest and 21Shares partnership has the longest active registration, and the fund’s SEC deadline in January led many industry experts to expect the first bitcoin ETF to be approved shortly after early 2024.
More than 10 different firms are now in the formal process towards launch and the competition to become one of the market leaders is expected to include different cost ratios and a heavy marketing attack. Several companies have already reduced the originally proposed fee.
It is not guaranteed that all applications will result in the fund entering the market. The Cboe website indicated on Wednesday afternoon that several bitcoin ETFs will begin trading on its BZX exchange on Thursday.
ETF anticipation seems to have boosted the price of Bitcoin in recent months. Some cryptocurrency advocates believe the arrival of bitcoin ETFs will unleash new demand for the asset class from the types of investors previously scared off by concerns about the custody and security of crypto-specific exchanges.
The approval of the ETF comes after a year of major enforcement action against crypto firms and industry leaders, including the conviction of FTX founder Sam Bankman-Fried and several actions against Binance and its founder Changpeng Zhao.
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