SEC approves spot bitcoin ETFs in historic decision

Jan 11th, 2024 | By | Category: Alternatives / Multi-Asset

In a landmark move that promises to transform the cryptocurrency investment landscape, the US Securities and Exchange Commission (SEC) has authorized the listing of the first spot bitcoin ETFs.

In a landmark move that promises to transform the cryptocurrency investment landscape, the US Securities and Exchange Commission has finally given its stamp of approval to spot bitcoin ETFs.

The SEC has approved the listing of the first spot bitcoin ETFs.

The SEC’s announcement encompasses all 11 of the current applicants seeking approval for spot bitcoin ETFs, including firms such as Grayscale Investments, BlackRock, Fidelity Investments, Invesco, VanEck, Ark/21Shares, and WisdomTree. A significant number of these spot bitcoin ETFs are anticipated to commence trading as early as Thursday.

This landmark decision is poised to draw substantial inflows into these products, with numerous analysts projecting net new assets ranging between $50 billion and $100 billion for this year alone.

As to which ETFs will lead the pack in terms of popularity remains to be seen with issuers engaged in a fee war over recent weeks to make their product more attractive to investors. Fees for the 11 spot bitcoin ETFs range from Bitwise’s 0.20% to Grayscale’s 1.5%. Several firms, including BlackRock, Invesco, Ark/21Shares, and Bitwise, are also waiving their fees during the initial months of trading.

While Grayscale’s ETF carries a premium price tag, it distinguishes itself from the competition by entering the market with a substantial $29 billion in assets under management, stemming from the conversion of the Grayscale Bitcoin Trust. This notable liquidity advantage could prove enticing to potential investors.

The arrival of spot bitcoin ETFs comes over a decade after Cameron and Tyler Winkelvoss initially sought to create such funds in 2013. While ETFs tracking cryptocurrency futures made their debut in 2021 with the launch of the ProShares Bitcoin Strategy ETF (BITO US), the SEC had consistently resisted approving a spot bitcoin ETF, citing concerns about insufficient safeguards against fraud and the multiple scandals besetting crypto service firms such as FTX.

However, a pivotal moment arrived in August when the agency lost a crucial court case against Grayscale Investments. This legal setback challenged the SEC’s decision to prevent Grayscale from converting its Grayscale Bitcoin Trust into a spot bitcoin ETF, effectively clearing the path for spot ETF approval.

In its official statement on Wednesday, the SEC said: “After careful review, the Commission finds that the Proposals are consistent with the Exchange Act and rules and regulations thereunder applicable to a national securities exchange.”

While this endorsement underscores the SEC’s confidence in the compliance of these funds with established regulatory standards, the regulator maintained its stance of not endorsing bitcoin which it labeled as “speculative”.

Nonetheless, the SEC’s approval of spot bitcoin ETFs represents a historic milestone in the evolution of cryptocurrency investments. By offering a regulated and accessible avenue for investors to engage in the crypto market, this decision reignites the growing acceptance and integration of digital assets into the traditional financial ecosystem.

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