The U.S. Securities and Exchange Commission (SEC) has reportedly approved the first spot bitcoin exchange-traded funds (ETFs), signifying significant progress in the integration of cryptocurrency into mainstream financial markets.
The Financial Times reports the Securities and Exchange Commission’s recent decision to approve spot bitcoin ETFs marks a significant change in the commission’s stance on cryptocurrency. The approval of eleven ETFs from a combination of established financial organizations and digital finance newcomers has cleared the path for a more regulated and accessible route for investing in bitcoin.
Jad Comair, CEO of Melanion Capital – the first company to launch a Bitcoin-themed ETF in the EU – highlighted the significance of this move, stating, “It’s a huge milestone; it’s recognition of bitcoin being a large-scale traditional investment. We’re opening the doors to Wall Street.”
For nearly a decade, the regulator has been resistant to approving such ETFs due to concerns around the susceptibility of cryptocurrencies to manipulation and fraud. However, last year, the crypto asset manager Grayscale successfully challenged the SEC’s rejection of an earlier spot bitcoin application, and a federal appeals court ruled in August that the decision was “arbitrary and capricious.”
This ruling put pressure on the SEC to reevaluate their stance, ultimately leading to their recent decision to approve spot bitcoin ETFs.
Cathie Wood of Ark Invest, emphasizing the goal of accessibility, mentioned, “We want to make sure that we provide access and make it as accessible as possible… We are not looking to maximize profits on this. We’ve got other actively managed products that will help us.”
In a new approach, these funds will use cash to create and redeem new shares, differing from the usual practice of in-kind transactions involving their underlying assets.
The SEC has worked closely with ETF providers to refine their proposals in order to protect investors from market manipulation.
They have also outlined the financial institutions involved in creating and redeeming shares, however, despite this progress, some concerns still remain. Dennis Kelleher, president of Better Markets, warned that the approval “is a historic mistake that will not only unleash crypto predators on tens of millions of investors and retirees but will also likely undermine financial stability”.
With the launch of spot bitcoin ETFs, U.S. investors can now have direct exposure to bitcoin through a regulated product, mitigating risks associated with unregulated exchanges and the higher costs of bitcoin futures ETFs. This development is expected to add a new vitality to the most popular and liquid crypto token, with the U.S. joining other markets in offering investment in bitcoin.