Gary Gensler, chairperson of SEC, gave a statement clearly mentioning that although they have approved the listing and trading of certain spot bitcoin ETFs, they still do not approve or endorse bitcoin.
The securities regulator, SEC has approved 11 applications to offer ETFs tracking Bitcoin. The world’s largest asset manager, BlackRock, along with various others like Fidelity, Invesco, and some digital companies like Grayscale and Ark Invest, have been allowed to issue ETFs that could begin trading late next week on Nasdaq.
The SEC’s approval came after a harsh legal battle and months of waiting. It even got delayed by 24 hours when hackers gained access to the regulator’s official social media handle on X and posted an announcement that the applications for ETFs had been approved, surging the bitcoin prices significantly.
This approval by the SEC is a huge achievement for financial institutions in the digital currencies industry that are sustaining somehow after over more than a year of market crashes and some bigshot bankruptcies.
After the meltdown of the scandalous crypto exchange FTX in December 2022, Bitcoin crashed to the drastic lows of near $16,000. It has almost tripled to about $47,000, which remains below the high of $69,000 in November 2021.
The recent climb in prices is credited to the optimism of crypto enthusiasts regarding the approval of ETFs by the SEC. This new financial product will help in the widespread adoption of cryptocurrency by the mainstream finance world.
Jad Comair, chief executive of Melanion Capital, said that it’s a huge achievement, and the approval marks its recognition as a widescale traditional investment. His company was the first one to issue a bitcoin thematic ETF in the European Union and is now getting ready to enter Wall Street.
In other markets of the world, spot bitcoin has been lately available, but the US approval is expected to bring in a new era for the popular and liquid crypto token.
US institutional and retail investors will now have direct exposure to crypto tokens through regulated products, which will eliminate the risks of fraud of buying directly from unregulated exchanges or mitigate the costs of directly investing in ETFs that are tied to bitcoin futures.
ETFs have been widely offered by firms like Vanguard and Charles Schwab. They are baskets of assets divided in the form of shares that can be bought and sold in the open market. These are popular amongst wealth managers who manage trillions of dollars in capital.
Instead of storing bitcoin in wallets that have a risk of being digitally looted, bitcoin ETFs would purchase shares in funds that own digital currency. This is because the ETF’s structure gives institutions and financial advisers a familiar and risk-averse way to invest in Bitcoin indirectly.
Several crypto critics, especially consumer protection and investor groups, have argued that allowing ETFs that track Bitcoin princess will motivate retail investors to put money into an industry that has been historically accused of numerous scandals and massive price volatility.
Gary Gensler, chairperson of SEC, gave a statement clearly mentioning that although they have approved the listing and trading of certain spot bitcoin ETFs, they still do not approve or endorse bitcoin. He has cautioned investors about the risks of bitcoin and products associated with it.
The ETF issues approved by the SEC will be directly invested in Bitcoin, except for Grayscale. They want to convert their $29 billion Bitcoin trust into an ETF. The other one is Hashdex, which aims to convert bitcoin futures into spot contracts.
These discrepancies have started a price war among ETF issuers. BlackRock, Fidelity and others have announced this week that fees of less than 0.5% will be levied and a range of other promises to remove several charges for the early months of trading.