The U.S. Securities and Exchange Commission on Wednesday approved rule changes to allow the creation of bitcoin exchange-traded funds, a long-awaited move that will give regular investors access to the cryptocurrency.
ETFs allow more retail investors to hold bitcoin indirectly via a share traded on a stock exchange. Investors expect acceptance of the token could begin to become more mainstream with more and more institutions like BlackRock, Fidelity, and others offering these products.
The decision will likely lead to the conversion of the Grayscale Bitcoin Trust, which holds about $29 billion of the cryptocurrency, into an ETF, as well as the launch of competing funds from mainstream issuers such as BlackRock’s iShares and Fidelity. The first funds began trading Thursday.
The approval is a landmark event in the adoption of cryptocurrency by mainstream finance, as the ETF structure gives institutions and financial advisors a familiar and regulated way to buy exposure to bitcoin. This comes after a year that saw major law enforcement action against crypto firms and industry leaders, including the conviction of FTX founder Sam Bankman-Fried and multiple actions against Binance and its founder Changpeng Zhao.
“We think that the SEC approval, should we and others get it, is a green light for institutions. We’ve been talking to quite a few of them, and they’re much more interested now that the SEC effectively is paving the way,” Ark Invest CEO Cathie Wood told CNBC “Halftime Report” on Monday. Ark Invest has partnered with 21Shares on a proposed bitcoin fund.
SEC has for years opposed a so-called spot bitcoin fund, with several firms filing and then withdrawing applications for ETFs in the past. SEC Chair Gary Gensler has been an outspoken critic of crypto during his tenure.
However, the regulator appeared to change course on the ETF question in 2023, possibly due in part to an August loss to Grayscale in a court decision that criticized the SEC for blocking bitcoin ETFs while allowing funds that track bitcoin futures.
“Importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin," Gensler said in a statement Wednesday. "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.”
Hackers had compromised the SEC social media account on Tuesday to announce that bitcoin ETFs had been approved. In a statement, X explained the SEC did not secure the account with 2FA.