Compliance
SEC Approves Bitcoin ETFs But Doesn't Uncork Champagne

While the chair of the regulator was careful to stress the risks of bitcoin and the wider sector, the approval of exchange-traded funds linked to the crypto is a big step in the road towards "normalization" of these entities.
As widely
predicted, the US Securities
and Exchange Commission has given the green light to trading
and listing spot bitcoin exchange-traded funds. Even so, the
regulator’s chair warned about the risks of bitcoin.
Bitcoin rose above $47,000 briefly today but later eased back
below that level. Exactly 12 months ago, the crypto fetched
$17,936.
Interrupted by what turned out to be a fake social media posting,
expectations that the watchdog would approve this move helped to
buoy the cryptocurrency in recent weeks, adding to a rally that
saw it surge over the past 12 months.
But the SEC isn’t celebrating the move.
“While we approved the listing and trading of certain spot
bitcoin ETP shares today, we did not approve or endorse bitcoin.
Investors should remain cautious about the myriad risks
associated with bitcoin and products whose value is tied to
crypto,” Gary Gensler, SEC chair, said in a statement
yesterday.
“I have often said that the Commission acts within the law and
how the courts interpret the law. Beginning under chair Jay
Clayton in 2018 and through March 2023, the Commission
disapproved more than 20 exchange rule filings for spot bitcoin
ETPs. One of those filings, made by Grayscale, contemplated the
conversion of the Grayscale Bitcoin Trust into an ETP,” Gensler
said.
“We are now faced with a new set of filings similar to those we
have disapproved in the past. Circumstances, however, have
changed,” he said, going on to explain why the regulator thinks
it is now appropriate to approve the listing and trading of
certain ETFs.
Already, investment managers such as BlackRock, VanEck, Bitwise,
and others, have unveiled the fees they plan to charge for their
proposed spot bitcoin exchange-traded funds. The move comes as
regulators around the world wrestle with how to handle bitcoin
and digital assets more broadly. In
Switzerland, to give one example, there are concerns about
how bank regulations could affect one of the more vigorous
jurisdictions in the space. Regulators are trying to juggle
encouraging innovation and investment into new tech with concerns
that cryptocurrencies can cause instability and be a conduit for
illicit money.
That said, the market has been supported by expectations that US
interest rates may have peaked, lingering concerns about
inflation, and the fact that bitcoin is showing a base of
resilience even after market reverses.
In his statement, Gensler noted that the US Court of Appeals for
the District of Columbia held that the SEC hadn’t adequately
explained its reasoning in disapproving the listing and trading
of Grayscale’s proposed ETP.
“Based on these circumstances and those discussed more fully in
the approval order, I feel the most sustainable path forward is
to approve the listing and trading of these spot bitcoin ETP
shares,” Gensler said.
“Importantly, today’s Commission action is cabined to ETPs
holding one non-security commodity, bitcoin. It should in no way
signal the Commission’s willingness to approve listing standards
for crypto asset securities,” Gensler said. “Nor does the
approval signal anything about the Commission’s views as to the
status of other crypto assets under the federal securities laws
or about the current state of non-compliance of certain crypto
asset market participants with the federal securities laws.”