The US Securities and Exchange Commission has approved the first spot bitcoin exchange traded funds in a watershed moment that cryptocurrency enthusiasts are betting will draw new retail and institutional investors into the market.
The top American securities regulator cleared 11 ETFs to list, with sponsors ranging from established players such as Fidelity and Invesco to digitally focused newcomers including Grayscale and Ark Invest.
The first funds — which trade on exchanges like stocks and enjoy special tax treatment in the US — are expected to start trading as soon as Thursday morning, when BlackRock will ring the opening bell at Nasdaq to promote its iShares Bitcoin Trust.
The approval comes after months of anticipation and a bitter legal battle. It also caps a wild 24 hours that saw hackers briefly seize control of the SEC’s account on the social media site X and falsely claim that the applications had already been approved, prompting sharp swings in bitcoin’s price.
Bitcoin was trading 3 per cent higher at about $47,000 on Thursday morning, after the approval. The US Securities and Exchange Commission allowed the launch of these ETFs after being one of the most skeptical regulators in the world about this subject.
While spot bitcoin ETFs have been available in other markets, the US approvals are expected to usher in a new era for the most popular and liquid crypto token. US institutional and retail investors will now be able to gain direct exposure to the coin through a regulated product, without the risks of buying from unregulated exchanges or the higher costs associated with ETFs that invest in bitcoin futures.
“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” said Dennis Kelleher, president of Better Markets. It is something many groups and critics are worried about, as they have warned that making the product available via an ETF would encourage retail investors to move money into a sector known for repeated scandals and massive price fluctuations.
In a departure from normal ETF practice, the funds will use cash to create and redeem new shares rather than in-kind transactions involving their underlying assets — bitcoin, in this case.
The regulating agency had been resistant towards a spot bitcoin ETF for nearly a decade but finally allowed its launch after clear regulations, the approval of multiple ETFs and overcoming legal battles.