The Securities and Exchange Commission, the US federal regulators, have approved the first US-listed exchange traded funds (ETFs), a new financial product that tracks the price of Bitcoin.
The move is expected to be a watershed moment for the cryptocurrency industry, as well as Bitcoin, the world’s largest cryptocurrency. The approval comes almost a decade after SEC was first approached with the idea and will give investors exposure to Bitcoin without directly holding it.
SEC said it approved 11 applications, including from BlackRock, Fidelity and Invesco. Most of the products are expected to begin trading Thursday.
Bitcoin’s market capitalisation was slightly above $913 billion as of Wednesday, according to CoinGecko, and analysts are conservatively expecting inflows of $55 billion to $100 billion over the next five years.
The approvals come a day after an unauthorised person published a fake post on the SEC’s X account, saying the agency had approved the products for trading. The agency denied it on Tuesday and and deleted the post.
Bitcoin has soared more than 70 percent in recent months in anticipation of an ETF, and hit its highest level since March 2022 this week. On Thursday at 11 AM UAE time, it was trading at $46,103, up from the $16,000 level in November 2022 when Sam Bankman-Fried of FTX was arrested. Etherium, the second-most popular cryptocurrency, has also tracked Bitcoin’s rise.
On August 30 last year, a federal court in Washington had ruled that the SEC was wrong in rejecting an application from Grayscale Investments to create a spot bitcoin exchange-traded fund, a ruling that was considered a landmark for the crypto industry at the time and led to Wednesday’s approvals.
“We believed that Bitcoin could change the world, and we were and remain excited at the prospect of democratising access to this asset,” said Grayscale CEO Michael Sonnenshein.
SEC chairman Gensler: Caution amid crypto approval
Even though SEC chairman Gary Gensler voted for the approval, he has repeatedly said cryptocurrencies need more regulation and investor protections.
In a statement, Gensler said that approving the products was “the most sustainable path forward”, but added the agency did not endorse Bitcoin, calling it a “speculative, volatile asset” also used to fund crime.
“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” Gensler added.
Gensler, a Democrat, and SEC’s two Republican commissioners voted to approve the products, while the agency’s other two Democratic commissioners voted against. Gensler also said that the approval was in “no way” a signal that the SEC would be easing up on its crackdown on crypto players that are flouting its laws. The agency is pursuing action against Binance and CoinBase.
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