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  • J Huang and M Bacina

US approves first spot Bitcoin ETFs

Updated: Jan 11




Today, the US Securities and Exchange Commission approved the first spot bitcoin exchange traded fund (ETF) in a "watershed moment" that cryptocurrency advocates believe will draw new institutional and retail investors into the growing market.


The news of a first-ever US spot bitcoin ETF being approved was already in the limelight since early this week, after a fake post from the SEC's official X (formerly Twitter) account claimed the SEC

grants approval for #Bitcoin ETFs for listing on all registered national securities exchanges

The post went viral immediately on social media and business news websites until the SEC Chair, Gary Gensler, poured cold water by saying their X account was “compromised” and the announcement was "unauthorized". Bitcoin's price soared sharply after the post but swiftly reversed on the confirmation of fake news.


Somewhat dramatically, the SEC finally confirmed today that several spot bitcoin ETFs have been approved for listing and trading in the US.


In his press release, Chair Gensler provides the rationale behind the approval in a begrudging tone:

We are now faced with a new set of filings similar to those we have disapproved in the past. Circumstances, however, have changed. The U.S. Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order).

In the abovementioned Grayscale case, the court found unfavourable against the SEC, saying the

denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.

By finally approving bitcoin ETFs, Chair Gensler admits the SEC will provide protections for investors by:


  1. requiring bitcoins exchange-traded products to provide disclosure;

  2. enabling the products to be listed on registered and regulated national securities exchanges; and

  3. creating a level playing field for issuers to promote fairness and competition through the SEC's review of the registration statements for 10 spot Bitcoin ETFs.


SEC Commissioner Peirce, a famous crypto-friendly dissenter within the SEC, issued an official statement saying the approval came too little too late. She criticises the SEC that

rather than admitting error, offers a weak explanation for its change of heart.

She also calls the SEC out for their "prejudice against the underlying asset" when deciding to reject bitcoin ETF applications, and that the SEC was essentially forced to do their job after a "judicial rebuke"

We squandered a decade of opportunities to do our job. If we had applied the standard we use for other commodity-based ETPs, we could have approved these products years ago, but we refused to do so until a court called our bluff

which had the effect of

depriving investors of the opportunity to gain exposure to bitcoin in a more convenient and investor-friendly way.

However, Commissioner Peirce did point out a silver lining behind this approval decision,

now that we know that the Commission can execute a robust correlation analysis, perhaps the road to approving other spot crypto ETPs will not be as bumpy (even if the Commission insists on continuing to apply a test it applies nowhere else).

and

I am celebrating the right of American investors to express their thoughts on bitcoin by buying and selling spot bitcoin ETPs. And I am celebrating the perseverance of market participants in trying to bring to market a product they think investors want

Pundits said Bitcoin ETFs will increase distribution as the product will be recommended by more financial advisors,

Because custody and holding crypto and bitcoin yourself is not easy, it’s not really possible today for wealth advisors to put client money into this asset class. But with an ETF, it becomes very straightforward just like any other asset class.

Some of these analysts predicted bitcoin ETFs would help push the price of bitcoin soaring above USD$200,000 as investors pour USD$65 billion (AUD$97 billion) into the US products, equivalent to about 1 per cent of the ETF market in the US.


Australian press reports have speculated that the US approval could lead to new spot Bitcoin ETF listings in Australia. ASIC has similarly imposed tough restrictions on the listing of Bitcoin ETFs and one such fund was delisted last year owing to low volumes. It remains to be seen whether the SEC's announcement sparks renewed interest in Bitcoin ETFs among issuers and investors closer to home.


Written by Michael Bacina, Steven Pettigrove and Jake Huang


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