SEC Greenlights First Spot Bitcoin ETFs Amid Market Controversy

Jan. 11, 2024
SEC Greenlights First Spot Bitcoin ETFs Amid Market Controversy

The U.S. Securities and Exchange Commission (SEC) finally green-lit the launch of the first regulated spot Bitcoin exchange-traded funds (ETFs). This was following the false announcement placed on the official Twitter account of the SEC, causing only temporary havoc in the markets.

According to an official SEC press release dated January 10th, the Commission has officially approved the listing and trading of spot Bitcoin exchange-traded product (ETP) shares. The announcement included a quote by the Chairman of the SEC, Gary Gensler, in which he urged that the Commission act in conformity with the decisions made by the court and law.

Chairman Gensler pointed out the Commission’s rejection of 20-plus spot Bitcoin ETP filings from 2018 to March 2023. Following a court ruling, he cited a change in circumstances that found the explanation for rejecting Grayscale’s proposed ETP as having failed to satisfy the Commission. The court vacated the Grayscale Order, prompting the Commission to reconsider its stance.

In the statement, Gensler clarified that the Commission evaluates rule filings by assessing their consistency with the Exchange Act and related rules. This process guides the Commission’s review of regulatory submissions. He noted neutrality to particular companies, investments, or the assets at the bottom of an ETP as long as they stuck to the laws.

James Seyffart, an ETF analyst, mentioned on X (previously Twitter) that the commission probably did not mean to release the approval document at the time it did but would most likely repost it anyway.

Navigating Bitcoin: Essential Cautions & Risks

Importantly, Gensler underscored that this approval is limited to ETPs holding one nonsecurity commodity BTC. Other ETPs, holding crypto assets or different underlying asset types, may not necessarily comply with the listing standards for such securities under the Act despite the signal. Gensler reaffirmed the Commission’s position that most crypto assets are subject to federal securities laws.

In this approval, the SEC has outlined provisions requiring sponsors to provide safeguards for Bitcoin ETPs. These measures are part of broader investor protections specified by the SEC. The provision includes requirements that certain securities exchanges where the shares are listed and traded must satisfy rules. Designed to prevent fraud and manipulation in the trading of those shares, these rules serve this specific purpose.

At the same time, the staff of the Commission is reviewing registration statements for 10 Bitcoin spot ETPs. Since 2013, individuals or entities have made these filings. Gensler cautioned investors about Bitcoin’s speculative and volatile nature. He specifically highlighted its association with ransomware, money laundering, sanction evasion, and terrorism financing as reasons for careful consideration.

The SEC has approved listing and trading spot Bitcoin ETP shares. However, it cautions investors to be vigilant as risks of Bitcoin and related products remain pertinent.

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Rida Fatima

News writer
An ardent wordsmith with a rich five-year background in delving into the realms of finance and cryptocurrencies. Alongside curating captivating blogs, Unique's talents extend to crafting imaginative and engaging content.