Washington/New York, January 10 (Reuters) The US Securities and Exchange Commission (SEC) allowed the first US-listed exchange-traded funds (ETFs) to track bitcoin on Wednesday, marking a watershed moment for the world’s largest cryptocurrency and the larger crypto industry, according to SEC Chair Gary Gensler.
According to a notification on its website, the US Securities and Exchange Commission approved 11 applications, including those from BlackRock (BLK.N), Ark Investments/21Shares (ABTC.S), Fidelity, Invesco (IVZ.N), and VanEck, among others. Some products are scheduled to start trading as early as Thursday, sparking a strong battle for market share.
The products, which have been in development for ten years, are a game changer for bitcoin because they give institutional and retail investors access to the biggest cryptocurrency in the world without actually holding it. They also give the scandal-plagued crypto industry a significant boost.
According to Standard Chartered analysts, the ETFs may generate $50 billion to $100 billion in revenue this year alone, potentially propelling the price of bitcoin to $100,000. Other economists estimate that inflows will be closer to $55 billion over five years. “It’s a huge positive for the institutionalization of bitcoin as an asset class,” said Andrew Bond, Rosenblatt Securities’ managing director and senior fintech analyst. “The ETF approval will further legitimize bitcoin.”
Bitcoin was last up 3% to $47,300. The cryptocurrency has risen more than 70% in recent months in anticipation of an ETF, reaching its highest level since March 2022 earlier this week. Costs and liquidity will most likely determine success in what economists expect to be a fierce competition to acquire assets for spot bitcoin ETFs.
Some issuers, like BlackRock and Ark/21Shares, have reduced their own prices in new filings this week, underscoring their haste to get a piece of the expected capital influx. Fees range from 0.2% to 1.5%, with many firms offering charge waivers for a limited time.
For short-term speculators, though, liquidity could be more important than fees. The more liquid an ETF is, the easier it is for investors to buy and redeem shares at values that closely match the current price of bitcoin. Companies should also expect an increase in online advertising and other forms of marketing. Some issuers, such as Bitwise and VanEck, have already launched commercials promoting bitcoin. “It’s very unprecedented, so we’ll see how it goes. “I’ve never seen ten of the same ETFs launched on the same day, so this is a first,” said Steven McClurg, chief investment officer at Valkyrie, whose ETF was among those approved on Wednesday.
The SEC’s decision to approve bitcoin ETFs marks a U-turn after rejecting them for a decade owing to concerns about their potential for manipulation. Gensler, the SEC chair, is likewise a staunch cryptocurrency skeptic. Jim Angel, an associate professor at Georgetown’s McDonough School of Business, believes Bitcoin ETFs could pave the way for more innovative cryptocurrency products. Several issuers, for example, have already applied for spot ether ETFs to track the value of the second-largest cryptocurrency. “Once the dam has been breached, it’s going to be really hard for the SEC to continue its ‘just say no to crypto’ approach,” Angel said in a statement.
Hopes that the SEC would eventually allow bitcoin ETFs soared last year after a federal appeals court declared that the agency was incorrect in rejecting Grayscale Investments’ proposal to convert its existing Grayscale Bitcoin Trust (GBTC) into an ETF. The verdict compelled the agency to reconsider its position. In a statement, Gensler stated that, in light of the court verdict, authorizing the goods was “the most sustainable path forward,” but that the agency did not support bitcoin, which is dangerous and volatile.
The cryptocurrency industry reacted positively to the news. “Like many of Grayscale’s future-forward investors, we believed that bitcoin could change the world, and we were and remain excited at the prospect of democratizing access to this asset through a U.S.-regulated investment vehicle,” Michael Sonnenshein, CEO of Grayscale, stated. Douglas Yones, head of exchange-traded products at the New York Stock Exchange, where some of the products will be listed, described the clearance as a significant “milestone” for the ETF industry.
Cynthia Lo Bessette, head of digital asset management at Fidelity, stated that the new products will provide “increased choice for investors who want to engage with” cryptocurrency. The approvals came a day after an unauthorized person posted a bogus post on the SEC’s account on social media site X, claiming the agency had cleared the new products for trade. The agency swiftly disavowed and removed the post.
On Wednesday, it announced that it is working with law enforcement, including the Federal Bureau of Investigation and the SEC’s own internal watchdog, to examine the event. Further confusion arose on Wednesday afternoon when the SEC posted a notification on its website indicating that the ETFs had been approved but then withdrew it, only to repost it again. Hannah Lang reported from Washington, and Suzanne McGee Additional reporting. Chris Prentice and Douglas Gillison are in Washington; Laura Matthews is in New York. Editing by Michelle Price, David Evans, Jonathan Oatis, and Matthew Lewis.