WASHINGTON (AP) — The US Securities and Exchange Commission (SEC) has granted approval for the first spot bitcoin exchange traded funds (ETFs), a move that cryptocurrency enthusiasts believe will attract new investors to the market. The SEC has cleared 11 ETFs for listing, featuring sponsors such as Fidelity and Invesco, as well as Grayscale and Ark Invest. These ETFs, which trade on exchanges like stocks and enjoy special tax treatment in the US, are expected to begin trading on Thursday. BlackRock, one of the approved sponsors, will ring the opening bell at Nasdaq to promote its iShares Bitcoin Trust.
This approval comes after months of anticipation and a legal battle. However, it also follows a 24-hour period where hackers briefly seized control of the SEC’s account on social media and falsely claimed that the applications had already been approved, resulting in sharp swings in bitcoin’s price. Despite the volatility, bitcoin was trading 3 percent higher at around $47,000 on Thursday morning.
While spot bitcoin ETFs have been available in other markets, the approval from the SEC is expected to mark a new era for the popular cryptocurrency. US investors will now have the opportunity to directly access bitcoin through a regulated product, reducing the risks associated with unregulated exchanges or high costs associated with bitcoin futures.
The decision is also a reversal for the SEC, which had resisted spot bitcoin ETFs for almost a decade due to concerns about manipulation and fraud. However, the regulator changed its stance after a federal appeals court ruled last year that its previous rejection of a spot bitcoin application was “arbitrary and capricious”. This ruling compelled the SEC to reevaluate its position.
Crypto enthusiasts believe that the introduction of ETFs will significantly increase demand for digital assets. However, some observers are skeptical about the extent of this impact. When ProShares launched the first bitcoin futures ETF in 2021, it attracted $1 billion in just two days.
Consumer protection and investor groups have expressed concerns about making the product available through an ETF, as it may encourage retail investors to invest in a sector known for scandals and price fluctuations. Critics, such as Dennis Kelleher from Better Markets, argue that the approval is a “historic mistake” that will expose millions of investors to crypto predators and undermine financial stability.
SEC Chair Gary Gensler acknowledged the risks associated with bitcoin and products tied to it, cautioning investors to remain cautious. He did, however, clarify that the SEC approved the listing and trading of certain spot bitcoin ETF shares, but did not endorse bitcoin itself.
In closing, the approval of spot bitcoin ETFs by the SEC is expected to revolutionize the market and attract new investors. The introduction of these ETFs will offer direct exposure to bitcoin for institutional and retail investors, opening doors to Wall Street. With the first funds set to begin trading soon, the crypto industry is poised for further growth and potential mainstream acceptance.