IMPORTANT POINTS:
- The SEC approves ETFs that invest directly in Bitcoin for the first time, marking a milestone for the digital asset sector.
- The decision expands access to Bitcoin on Wall Street and beyond, positively impacting its value.
- This approval suggests a move towards greater regulation and maturity of the cryptocurrency industry.
The US Securities and Exchange Commission (SEC) has for the first time approved exchange-traded funds (ETFs) that invest directly in Bitcoin, a move considered a momentous event for the roughly 1.7 trillion digital asset sector. of dollars. This decision will expand access to the largest cryptocurrency on Wall Street and beyond.
Historic SEC approval
The SEC, whose three-part mandate includes protecting investors, authorized 11 funds to begin trading Thursday.
This approval also marks a rare capitulation by the SEC after opposition that lasted more than a decade, since Tyler and Cameron Winklevoss first proposed a Bitcoin ETF in 2013. BlackRock Inc.’s surprise application last June, followed by an appeals court ruling that called the denial of a different application “arbitrary and capricious,” sparked a sharp rally in the cryptocurrency, fueling speculation that U.S. regulators would finally give their blessing to the structure.
Impact on the Bitcoin market
The decision comes a day after a false post on the SEC’s Account X, which claimed that the agency had approved the ETFs. The regulator later said the account had been compromised, causing significant fluctuations in the price of Bitcoin.
Bitcoin rose less than 1% to $45,729 following the approvals. The original cryptocurrency, which plunged 64% in 2022, more than doubled in 2023, largely due to speculation that the SEC would finally approve ETFs that would allow investors to gain exposure to the token in their traditional brokerage accounts rather than one of the native crypto startups that have come under increasing government scrutiny following a series of scandals and bankruptcies in the sector.
The path to regulation
Cryptocurrency proponents have argued for years that a spot fund that invests directly in Bitcoin would be beneficial to investors and help bring the industry closer to the more regulated world of traditional finance. It also suggests something of a maturity milestone for the relatively nascent industry, where clashes with regulators came to a head following the collapse of Sam Bankman-Fried’s FTX empire, highlighting the risks lurking in the industry.
Grayscale Investments Key Victory
The landmark decision comes after Grayscale Investments won a key victory over the SEC. A federal appeals court had overturned the rejection of Grayscale’s request to convert its Bitcoin trust into an ETF. The court called the denial “arbitrary and capricious” because the commission did not explain its different treatment of similar products. ETFs holding Bitcoin futures were approved in 2021.
Filings in 2023 from Wall Street heavyweights such as BlackRock, Invesco and Fidelity had led some analysts to suggest that the SEC could be more open toward a Bitcoin fund after years of failures to launch it by several issuers. BlackRock, for example, has a nearly impeccable track record in launching ETFs, and many saw its entry into the race as a harbinger of an eventual debut.
