The U.S. Securities and Exchange Commission (SEC) approved on Wednesday the first U.S.-listed exchange-traded funds (ETFs) to track bitcoin. Experts described it as a watershed moment for both the world’s largest cryptocurrency and the broader crypto industry.
The announcement follows a turbulent 24 hours for the decentralized digital currency. A post on X, published on the SEC account Tuesday, announced the approval of the long-awaited ETFs. This caused bitcoin’s price to surge by more than $1,000. Shortly thereafter, the SEC declared that its account had been “compromised” and the post was “unauthorized.”
However, on Wednesday, the SEC did approve the ETFs—this time legitimately—while maintaining a skeptical stance on cryptocurrency.
“Today, the Commission approved the listing and trading of a number of spot bitcoin exchange-traded product (ETP) shares,” SEC Chair Gary Gensler said in a statement on Wednesday.
Although investors can currently buy and sell bitcoin, or gain exposure through brokerage firms, mutual funds, national securities exchanges, peer-to-peer payment apps, and non-compliant crypto-trading platforms, today’s action will introduce certain protections for investors, he explained.
The ETFs, in development for nearly a decade, are a game-changer for bitcoin. They offer investors exposure to the world’s largest cryptocurrency without the need to own bitcoin directly.
“Bitcoin’s spot ETF approval is a pivotal moment in bitcoin’s history. It reinforces the fact that the interest and acceptance of bitcoin is rapidly rising and it is here to stay to shape the future of wealth and finance,” said Rahul Pagidipati, CEO of the Singapore-headquartered ZebPay, which claims to be a fast-growing and popular cryptocurrency exchange.
Despite concerns from some officials and investor advocates, the SEC granted 11 applications, including those from ARK Invest, BlackRock, VanEck, WisdomTree, and Fidelity, according to Mr. Pagidipati.
In its registration statement, for instance, BlackRock itself warns that: “There is no assurance that bitcoin will maintain its value in the long, intermediate, short, or any other term. In the event that the price of bitcoin declines, [BlackRock] expects the value of the shares to decline proportionately.”
However, the majority of the ETFs will start trading on Thursday, initiating competition for market share, according to reports.
Exciting Journey
Indeed, the crypto industry has experienced a remarkable journey, marked by resilience and growth.Cryptocurrency has emerged as one of the most contentious issues in global economic forums. According to TripleA, there are now over 300 million cryptocurrency users globally, the average country’s rate of crypto ownership is around 4 percent, and over 18,000 businesses globally accept cryptocurrency payments. According to Forbes, the global cryptocurrency market cap today is $1.85 trillion, which has grown over 30 percent in the past five years.
Cryptocurrency is perceived as a significant threat to the existing financial system, despite its promise to reduce corporate red tape, enhance financial inclusion, and create a more just and transparent economy. In addition, as cryptocurrency is based on decentralized blockchain technology, it has led to unprecedented regulatory challenges. Consequently, governments have adopted differing stances on digital money governance with several taking opposing positions.
Christine Lagarde, the head of the International Monetary Fund, for instance, recently stated that international regulatory action on cryptocurrencies is “inevitable.”
“We are actively engaging in anti-money laundering and countering the financing of terrorism. And that reinforces our determination to work in those two directions,” she said.
Mr. Gensler is also a staunch crypto skeptic. “Please note that the approval is cabined to ETPs [exchange-traded products] holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.
“Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws,” he said in his statement on Wednesday.
The approval represents a significant U-turn for the SEC, which had previously rejected bitcoin ETFs over concerns about potential manipulation.
“[Hence,] the approval of spot Bitcoin ETFs not only symbolizes a maturing market but also signifies support from regulatory authorities,” said Mr. Pagidipati. “We believe that the approval enhances accessibility for investors [ as well as] contributes to the establishment of a more robust and regulated crypto market, aligning with our vision for a thriving Web3 economy.”
Standard Chartered analysts believe that a spot bitcoin ETF could attract over $1 billion in inflows in the first quarter alone.
The price of bitcoin hovered around $46,220.70 at the time of reporting on Thursday.
