The Securities and Exchange Commission begrudgingly approved exchange-traded funds that directly hold bitcoin Wednesday, a move long-awaited by fans of digital currencies and criticized by financial watchdogs skeptical of the crypto industry.
The commission authorized 10 exchange-traded funds, or ETFs, that invest in bitcoin, including funds proposed by giants such as Blackrock and Fidelity as well as by smaller financial companies.
“While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin,” SEC Chair Gary Gensler said in a statement. “Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”
Gensler also added that the approval of the bitcoin funds did not imply the SEC would approve funds or exchange-traded products (ETPs) based on other digital currencies or assets.
“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. 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,” Gensler said.
The SEC rejected applications for similar funds for years. Last year, however, the U.S. Court of Appeals for the District of Columbia ruled against the SEC’s refusal to approve an application from Grayscale to convert a derivative fund into one that would directly hold bitcoin, calling the SEC’s position “arbitrary and capricious.”
“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 explained.
The much-anticipated approval has been hailed as a watershed event for digital currencies that proponents say will broaden access to investing in bitcoin and possibly lead to broader acceptance of cryptocurrencies as legitimate financial assets. The price of bitcoin has exploded higher in recent months, rising from around $25,000 in September to more than $45,000, in part because many bitcoin investors believe the ETFs will create more demand for the asset.
Critics blasted the SEC on Wednesday night.
Dennis M. Kelleher, Co-founder, President, and CEO of Better Markets, said the approval is a “an 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 flagrantly lawless crypto industry crashing and burning due to a mountain of arrests, criminal convictions, bankruptcies, lawsuits, scandals, massive losses, and millions of investor and customer victims, who would have thought that the SEC would come to its rescue by approving a trusted and familiar investment vehicle that will enable the mass marketing of a known worthless, volatile, and fraud-filled financial product to Main Street Americans,” Kelleher said.