The U.S. Securities and Exchange Commission (SEC) has approved the first regulated Spot Bitcoin exchange-traded funds (ETFs) in the United States. This decision allows major financial players like ARK 21Shares, Invesco Galaxy, and BlackRock to list and trade spot Bitcoin ETFs, offering investors direct exposure to Bitcoin's price without owning the cryptocurrency. Despite some initial skepticism, the move is celebrated in the crypto community, with expectations of massive inflows into these ETFs. SEC Commissioner Hester Peirce, known as 'Crypto Mom', criticized the SEC's previous reluctance to approve Bitcoin ETFs. Meanwhile, Bloomberg ETF analyst James Seyffart believes that the ETFs are likely to be ready for trading as early as Jan. 11.
SEC Approves First Regulated Spot Bitcoin ETFs in the U.S.
The U.S. Securities and Exchange Commission (SEC) has made a landmark decision by approving the United States' first regulated Spot Bitcoin exchange-traded funds (ETFs). This historic move comes just a day after a false announcement from the SEC's Twitter account caused even more confusion in the markets.
On Jan. 10, the SEC greenlit the 19b-4 applications from a host of major players in the financial sector, including ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, Grayscale, Bitwise, Hashdex, and Franklin Templeton. This approval allows for the listing and trading of Spot Bitcoin ETFs on various exchanges. Initially, there was some confusion as the filing was briefly available on the SEC website before an ‘Error 404’ message appeared, but it was later made accessible through a different link.
The cause of the ‘Error 404’ message, which appeared during the announcement of the approval of 11 spot Bitcoin ETF filings, remains unclear. It's speculated that it could have been due to either the commission pulling the document or an overload of site traffic. ETF analyst James Seyffart suggested that the SEC might not have planned to release the document when it did but might repost it.
This ETF approval is a huge milestone as it introduces the first regulated exchange-traded product in the U.S. that offers investors direct exposure to Bitcoin's price. This eliminates the need for investors to purchase Bitcoin (BTC) directly or manage its custody. Instead, they can buy shares in ETFs that have Bitcoin as their underlying asset.
Spot Bitcoin ETFs are now set to be a focal point in the industry, with many watching to see when trading will start. Alex Thorn, the head of digital at Galaxy Research, estimates that Spot Bitcoin ETF inflows could hit $14 billion in the first year. Meanwhile VanEck, a global fund manager, predicts about $2.4 billion flowing into Spot Bitcoin products in the first quarter of 2024.
Just two days before the approval, on Jan. 8, ten issuers filed their final amended S-1 and S-3 filings, revealing the fees they plan to charge for their Bitcoin ETFs. BlackRock, the largest asset manager, will charge a 0.2% fee until its fund reaches $5 billion in assets under management (AUM). Bitwise is slightly higher at 0.24%, with Ark 21Shares and VanEck at 0.25%. Ark 21 Shares stands out by waiving all fees for the first six months or until it reaches $1 billion AUM. On the higher end, Grayscale is set to charge a 1.5% fee rate, making it the most expensive Bitcoin ETF product.
Nothing Left to Say?
Naturally, the celebrations about the Bitcoin ETF approvals are in full swing on social media. This enthusiasm is especially evident on the X platform, where the hashtag #BitcoinETF has been trending, and the term "Bitcoin ETF" has seen a surge in popularity, reaching a peak score of 100 on Google Trends.
However, amidst this celebratory atmosphere, the United States Securities and Exchange Commission's X account, @SECGov, has remained silent since it confirmed a security breach on Jan. 9. This incident, described as a result of a "bungled" tweet about Bitcoin ETF approvals, has not deterred crypto X users from actively engaging with the account. They have been tagging @SECGov in posts, which range from discussing the intricate details of the ETF approval process to criticizing the regulator for what is seen as a massive lapse in managing the security of its social media account.
Crypto Mom Has Something to Say
The Bitcoin ETF approval might not have been possible without a pivotal appeal by Grayscale Investments last year. SEC Commissioner Hester Peirce, often referred to as 'Crypto Mom' for her supportive stance on cryptocurrencies, played a crucial role in this outcome.
For over a decade, issuers have been trying to launch a spot Bitcoin ETF, facing continuous setbacks. The situation took a decisive turn when the U.S. District Court of Appeals overruled the SEC's denial of Grayscale Investment’s application for a Spot Bitcoin ETF in October 2023. This court decision mandated the SEC to reevaluate Grayscale's proposal to transform its Bitcoin trust into a Spot Bitcoin ETF.
Commissioner Peirce, along with Gary Gensler and Mark Uyeda, voted in favor of approving the Spot Bitcoin ETF. However, Caroline Crenshaw and Jaime Lizarraga reportedly did not support the approval. Despite the recent approvals, Peirce criticized the SEC for its prolonged resistance to spot Bitcoin ETFs and its failure to apply the same standards used for other commodity-based ETPs (Exchange-Traded Products). She also expressed disappointment over the SEC's reluctance to admit its error in delaying the approvals and its weak justification for the change in stance.
Peirce also highlighted that the SEC was taken by surprise by the Grayscale ruling last year, which she believes exposed the Commission's hesitancy in embracing crypto products. She lamented the lost decade of opportunities due to the SEC's reluctance to approve these products sooner.
After the approval, Bloomberg ETF analyst James Seyffart commented that the ETFs are likely to be ready for trading as early as Jan. 11, given the quick progress in approving the S-1 applications.
