The U.S. Securities and Exchange Commission (SEC) had to put out a massive fire after a false tweet from its compromised X account falsely announced the approval of Bitcoin ETFs. This briefly boosted BTC's price before the SEC clarified it as a result of a hack. In the midst of all this confusion, the SEC is on the cusp of deciding on Bitcoin ETFs, with several asset managers eagerly awaiting approval for their ETF proposals.
Despite this, there is still uncertainty about how exactly the SEC will proceed, with possibilities including a seriatim vote or delegating the decision to its staff. The SEC's mixed historical stance on crypto ETFs only adds to the confusion and speculation surrounding the approval of Bitcoin ETFs.
False Tweet Sparks Bitcoin ETF Confusion
The U.S. Securities and Exchange Commission (SEC) found itself right at the center of a misinformation storm over the past 24 hours, after a false announcement on social media about the approval of Bitcoin exchange-traded funds (ETFs). The confusion began when an unauthorized tweet from the SEC's compromised X account claimed that the SEC had approved Bitcoin ETFs for trading.
This false news momentarily boosted the price of Bitcoin (BTC), pushing it above $46,000. However, the excitement was short-lived as the SEC quickly clarified that the tweet was the result of a security breach and not an official statement from the agency.
In a statement to CNBC, an SEC spokesperson confirmed that the regulator's X account had been accessed by an unknown party. The breach that occurred just after 4 p.m. ET, led to the publication of the false information. The SEC also emphasized its commitment to working with law enforcement and government partners to investigate the incident and address any related misconduct.
This event comes at a critical time for the SEC, as the regulator is expected to make a decision on Bitcoin ETFs very soon. The regulator has historically opposed Bitcoin ETFs, but the landscape seems to be changing as many people are optimistic that the ETFs will get approved. More than a dozen asset managers have applied to create Bitcoin ETFs, with many updating their registration statements just hours before the false tweet.
The price of BTC has been on an upward trajectory in recent months, fueled partly by optimism about the potential approval of Spot Bitcoin ETFs. Unlike funds that track Bitcoin futures, these ETFs would directly follow the price of Bitcoin, potentially attracting a new segment of investors into the crypto market. It is also believed that financial advisors, who often rely on ETFs, might also find these products a bit more accessible and less daunting than direct Bitcoin investments, given the complications surrounding the cryptocurrency's custody.
SEC Chair Gary Gensler, known for his very critical stance on cryptocurrencies, has been actively investors about the risks associated with crypto-related products. His approach, along with the SEC's legal actions against major crypto exchanges, has painted a picture of a regulator cautious about embracing digital assets too quickly, which has caused some in the industry to predict that Bitcoin ETFs might only be approved next year.
Interestingly, the SEC's recent loss in a court case against crypto asset manager Grayscale, which aims to convert a bitcoin holding trust into an ETF, has fueled speculation about the agency's potential shift in stance. The SEC's decision not to appeal the court's ruling is seen by some as a sign of impending approval for bitcoin ETFs.
Key Updates from BlackRock, Invesco, Galaxy, and Others
The SEC was not the only one left scrambling since this historic week has started. Several financial institutions, including BlackRock (BLK), VanEck, Invesco, Galaxy, ARK 21Shares, Grayscale, and others, are more than ready to launch their Bitcoin ETFs in the United States. These companies filed updated documents on Tuesday.
Just hours after the companies submitted documents detailing fees for their proposed products on Monday, the SEC responded with comments. This led to the influx of updated filings on Tuesday.
One of the key updates in the filings is the inclusion of specific wording aimed at protecting shareholders in the event of insolvency and preventing conflicts of interest between the ETF’s authorized participants. Additionally, Invesco and Galaxy revised their proposed fee structure, reducing it to 0.39% from the earlier 0.59%.
These latest developments reveal an almost unprecedented level of engagement between the SEC and the prospective ETF issuers, especially considering the rapid succession of filings, responses, and updates within just a 24-hour period. This has naturally been seen as a sign that the SEC might approve all the applications this week.
An Alternative Outcome
Despite the looming deadline for the Ark and 21Shares’ proposal, there's speculation that the SEC might not publicly vote on it. The agency's next meeting is scheduled for Jan. 11, just a day after the deadline, increasing the possibility of a seriatim vote, a process that allows commissioners to vote individually without a public meeting.
This method involves circulating the matter among commissioners, with each one voting before passing it to the next person. While this process can be efficient, it certainly also allows for even more delays, as any commissioner can hold up the process. The SEC has previously chosen not to vote on crypto ETFs, instead delegating the decision to its staff. However, this delegated authority can be challenged by commissioners, potentially prolonging the decision-making process even more.
Historically, the SEC has shown a mixed approach towards crypto ETFs. In January of 2023, a proposal by Ark and 21Shares was denied by a vote involving Chair Gary Gensler and Commissioners Caroline Crenshaw and Jamie Lizárraga. Earlier attempts by other entities, like the Winklevoss twins in 2016, also faced rejection. However, the SEC has started showing some openness, as seen in 2021 when Bitcoin futures ETFs were approved with minimal fuss.
The SEC has declined to comment on whether a vote will actually occur this week, leaving the community to look for signs on EDGAR or the SEC website for any updates, which is a bit of an issue now that there has been a security breach on the SEC’s official X page over the past day.
