SEC Chairman: Despite Approving Spot Bitcoin ETF, We Do Not Endorse Bitcoin
In a significant development for the cryptocurrency market, the U.S. Securities and Exchange Commission (SEC) has given the green light for the creation of bitcoin exchange-traded funds (ETFs) in the United States. This long-awaited decision is expected to pave the way for mainstream investors to access the controversial and volatile world of cryptocurrency.
The approval, announced on Wednesday, is anticipated to trigger the conversion of the Grayscale Bitcoin Trust, currently holding approximately $29 billion worth of bitcoin, into an ETF. Additionally, major players in the financial industry, such as BlackRock’s iShares and Fidelity, are poised to launch their own competing funds. The first bitcoin ETFs are set to commence trading on Thursday, marking a potential landmark event in the broader adoption of cryptocurrency by traditional financial institutions.
SEC Chair Garry Gensler emphasized the evolution of circumstances leading to this decision in a blog post, pointing to a change in the legal landscape. He cited a ruling by the U.S. Court of Appeals for the District of Columbia, which found the SEC’s previous disapproval of Grayscale’s proposed ETF lacked adequate reasoning, leading to the vacating of the previous order and remanding the matter to the Commission.
Gensler highlighted the SEC’s commitment to evaluating rule filings based on the merits and consistency with existing regulations. He stressed the Commission’s neutrality on specific companies, investments, or underlying assets of an ETF. The approval, limited to ETFs holding non-security commodities like bitcoin, does not indicate a broader shift in the SEC’s stance on crypto asset securities.
The SEC chair outlined key investor protections associated with the approved ETFs. Sponsors will be required to provide comprehensive disclosure, ensuring transparency for investors. The ETFs will be listed and traded on registered national securities exchanges, subject to rules designed to prevent fraud and manipulation. Existing regulatory standards, such as Regulation Best Interest for broker-dealers and fiduciary duties under the Investment Advisers Act for investment advisers, will apply to the purchase and sale of these approved ETPs.
Gensler emphasized the ongoing review of registration statements for ten spot bitcoin ETPs, a move aimed at fostering fairness and competition in the market. He noted the SEC’s experience overseeing spot non-security commodity ETPs since 2004, underscoring the agency’s readiness to regulate spot bitcoin ETP trading.
Despite the approval, Gensler urged caution among investors, highlighting the speculative and volatile nature of bitcoin. He emphasized the cryptocurrency’s association with illicit activities, including ransomware, money laundering, sanction evasion, and terrorist financing. While the SEC has approved the listing and trading of certain spot bitcoin ETP shares, it does not endorse bitcoin itself.
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