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SEC Ends Crypto Drama by Greenlighting 11 Bitcoin ETFs
The moment the world of cryptocurrencies wanted finally arrived on Wednesday. And this time it was true.
Regulators on Wednesday gave money managers the green light to launch 11 bitcoin spot exchange-traded funds, allowing everyday investors to gain exposure to the world’s largest cryptocurrency without having to own it.
The ETFs, which will begin trading Thursday, could make bitcoin a potential anchor in 401(k)s, IRAs and retirement plans and give it general acceptance.
The Securities and Exchange Commission made the announcement about 24 hours after a false social media post claimed that such approvals had already been granted.
The chaos sparked by that unauthorized post on of the crypto sector.
The price of bitcoin fluctuated Tuesday and Wednesday as investors tried to make sense of the crash, which wiped out tens of billions in market value in minutes.
SEC Chairman Gary Gensler clarified in a statement Wednesday that his agency “did not endorse or support bitcoin” when it approved the new products and called Wednesday’s announcement “the most sustainable path forward” following a defeat in court on this issue last year. summer.
“Investors should remain cautious regarding the myriad of risks associated with bitcoin and products whose value is tied to cryptocurrencies,” he said in his statement.
Securities and Exchange Commission Chairman Gary Gensler. (Jonathan Ernst/REUTERS) (REUTERS / Reuters)
An SEC commissioner, Caroline Crenshaw, published a dissenting opinion in which she called the agency’s actions “unsound and ahistorical.”
“I am concerned that these products will flood the markets and end up directly in the retirement accounts of U.S. families who can least afford to lose their savings due to the fraud and manipulation that appears prevalent in the bitcoin spot markets,” she said in her statement.
The SEC has rejected such requests in the past, arguing that the products were vulnerable to market manipulation.
The list of nominees approved by the SEC on Wednesday included some of the biggest names on Wall Street, from BlackRock (BLK) to Franklin Templeton (WELL), as well as a number of better-known companies in the cryptocurrency world.
These issuers competed with each other in the run-up to their launch to offer the lowest fees, hoping to attract as many investors as possible once the ETFs began trading.
Other big players on Wall Street also plan to get in on the action. JP Morgan Chase (JPM) and Goldman Sachs (GS) are among the giant banks that have offered to help some of these money managers set up and redeem shares in their new funds.
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Optimism about these approvals has helped bitcoin increase of 164% in 2023 AND start 2024 above $47,000, the highest level in nearly two years.
A decade in the making
The cryptocurrency industry has been waiting for this moment for more than a decade.
The first request to create a bitcoin spot ETF came in 2013 from crypto entrepreneurs and twins Tyler and Cameron Winklevoss, famous for their early role in creating Facebook.
Entrepreneurs Tyler and Cameron Winklevoss. (Lucas Jackson/REUTERS) (REUTERS/Reuters)
Since then, the SEC has rejected more than 30 similar requests.
A key turning point occurred last year in June, when the world’s largest money manager, BlackRock, filed for spot Bitcoin ETFs. Interest from one of Wall Street’s biggest names has prompted other asset managers to follow suit.
Another major development occurred last August when one of the ETF’s applicants, Grayscale Investments, won a landmark legal victory over the SEC. Grayscale had sued the SEC in 2022 after it was not allowed to convert its Grayscale Bitcoin Trust (GBTC) in a bitcoin spot offering.
Its main argument was that the agency had already approved exchange-traded products that contained bitcoin futures contracts and had therefore “acted arbitrarily and capriciously.”
A three-judge panel of the District of Columbia Court of Appeals in Washington sided with Grayscale, saying the company had “substantial evidence” that its product was similar to bitcoin futures ETFs previously approved by the SEC.
This forced the SEC to reconsider Grayscale’s spot bitcoin ETF application, along with others filed by rival money managers.
“We are now faced with a new set of documents similar to those we have disapproved of in the past,” Gensler said in his statement Wednesday. “Circumstances, however, have changed.”
One of the candidates, Cathie Wood, CEO of Ark Investment Management, told Yahoo Finance that the dominant providers of spot bitcoin ETFs will be the ones taking the most money from investors right from the start.
The winners “will be few and it will be the most liquid,” he said.
Cathie Wood, CEO of ARK Investment Management. (David Swanson/REUTERS) (REUTERS/Reuters)
Historically, the launch of other bitcoin products has caused the price of bitcoin to soar.
It happened in 2017 with the launch of the country’s first bitcoin futures contracts and then in 2021 with the SEC’s approval of the first bitcoin futures ETFs. Prices soared and then dropped significantly in the year following launch.
In recent weeks there has been a great debate over whether bitcoin will rise or fall once the much-lauded moment of approval arrives.
Gautam Chhugani, managing director of Bernstein’s research arm, said his team estimates such financial products will raise $10 billion or more in investment flows through the end of 2024 and “hundreds of billions of dollars” over a period two years.
This, he added, will help push the price of bitcoin even higher.
“We think bitcoin will reach $150,000 by 2025,” Chhugani added.
David Hollerith is a senior reporter at Yahoo Finance covering banking, cryptocurrencies and other areas of finance.
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