The U.S. Securities and Exchange Commission (SEC) has given its approval for bitcoin exchange-traded funds (ETFs), marking a significant development in the accessibility of the 15-year-old cryptocurrency. The SEC declared effective key filings from various markets on Wednesday, allowing these groundbreaking products to commence trading on Thursday.
This decision sparked a surge in bitcoin’s price, reaching over $47,500, with other cryptocurrencies experiencing a rally as well. Companies such as BlackRock, Fidelity, and Grayscale, among others, had sought to create bitcoin ETFs. They have recently announced and, in some cases, adjusted the fees they plan to charge investors, indicating an intense competition for investor funds. These are spot ETFs, holding actual bitcoins, in contrast to previously approved bitcoin futures ETFs, which involve derivative contracts tied to BTC.
The SEC’s approval follows years of delays and rejections of attempts to launch spot bitcoin ETFs. It also comes a few months after a court ruling in August that criticized the SEC for being “arbitrary and capricious” in rejecting Grayscale’s bid to convert its Grayscale Bitcoin Trust (GBTC) into a spot ETF.
SEC Chair Gary Gensler referenced the court loss as part of the motivation to approve the filings, stating that the court held the Commission failed to adequately explain its reasoning in rejecting Grayscale’s proposal. Advocates argue that a regulated spot bitcoin ETF would provide institutional and retail investors with exposure to bitcoin’s price movements without the need for direct investment in the digital asset.
SEC Commissioner Hester Peirce, a proponent of the digital asset industry, celebrated the approval, emphasizing the right of American investors to express their thoughts on bitcoin through spot bitcoin ETFs. However, Commissioner Caroline Crenshaw dissented, expressing concerns about the safety of the bitcoin spot market from fraud or manipulation, contrasting spot and futures products.
The approval, which seemed likely at the end of 2023, followed a series of meetings between the SEC and ETF issuers, along with amendments to the applicants’ filings. Brokerages like Fidelity and E-Trade started listing tickers tied to these ETFs on their platforms, adding to the optimism surrounding spot ETFs. The price of bitcoin, reflecting this optimism, rose from around $27,000 on October 1 to over $45,000 at the start of 2024.