The Securities and Exchange Commission (SEC) has granted formal approval for several Bitcoin Exchange-Traded Funds (ETFs), after a brief episode of confusion and fake news that occurred on January 9th.
The approval, in effect since January 10th, concerns the 19b-4 applications submitted by important entities such as ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, Grayscale, Bitwise, Hashdex, and Franklin Templeton.
This regulatory approval represents an innovative development in the United States and marks the beginning of regulated Bitcoin ETFs.
Summary
The approval of the Bitcoin ETF and the future internal investigation in the SEC: today’s news regarding the issue
The approval of the 19b-4 applications involves changes to the rules that allow the listing and trading of Bitcoin spot ETFs on their respective exchanges.
The brief availability of the deposit on the SEC website was followed by a temporary “Error 404” message, which was subsequently corrected through an alternative link.
This milestone paves the way for the first regulated product traded on the stock exchange in the United States, offering investors direct exposure to the price of Bitcoin without the complexities of ownership or self-custody.
Investors will purchase ETF shares with Bitcoin as the underlying asset.
The “Error 404” incident, which displayed the approval of 11 spot Bitcoin ETF deposits, has sparked speculation that it was caused by an intentional withdrawal or website traffic overload.
The ETF analyst James Seyffart suggested that the commission may have inadvertently released the approval document prematurely, but he anticipated a republication.
The approval concludes a decade-long struggle, which began with Cameron and Tyler Winklevoss’ request in 2013 to launch the Winklevoss Bitcoin Trust, always denied by the SEC due to market manipulation and fraud concerns.
The regulatory landscape has changed after Grayscale’s success in court in August 2023, which overturned the SEC’s refusal to convert the Grayscale Bitcoin Trust into a Bitcoin ETF.
Estimates on negotiations
Now that it has been approved, industry observers are eagerly awaiting the start of trading for these spot Bitcoin ETFs.
The estimates from Galaxy Research and VanEck predict significant inflows, with figures reaching $14 billion and $2.4 billion respectively in the first year and the first quarter of 2024.
The launch of a spot Bitcoin ETF in the United States requires approval from the SEC for the S-1 (or S-3) and 19b-4 forms submitted by the issuers. The amended final filings on January 8th include the fee structures for the respective Bitcoin ETFs.
BlackRock, the world’s largest asset manager, plans to apply fees of 0.2% until reaching $5 billion in assets under management (AUM).
Bitwise continues with 0.24%, while Ark 21Shares and VanEck propose fees of 0.25%. Ark 21 Shares, in particular, will waive all fees for the first six months or until reaching 1 billion dollars of AUM.
Grayscale is the ETF product on Bitcoin with the highest fees, imposing a 1.5% commission on potential investors.
The potential internal investigation of the SEC
The day after a hacking of the SEC’s X account that led to a false announcement about the approval of the Bitcoin ETF, securities lawyers claim that the SEC must initiate an investigation into itself for potential market manipulation.
The misleading tweet, previously published on the official SEC Twitter account, claimed the approval of Bitcoin ETFs for listing on all registered national exchanges.
The chairman of the SEC, Gary Gensler, promptly denied the announcement, attributing it to a compromise of the SEC’s Twitter account and clarifying that no approval had been granted for Bitcoin’s exchange-traded products.
The repercussions of the hack were palpable in the cryptocurrency markets, as Bitcoin experienced a significant price fluctuation.
After the initial false announcement, Bitcoin rose to $47,893 at 4:15 PM ET, marking a rapid increase of almost $1,000 in a few minutes. However, when the news was debunked, the cryptocurrency quickly dropped below $46,000.
Legal experts argue that the SEC, given its regulatory role, should investigate the incident to verify potential market manipulation.
The moment when the hack occurred, shortly before the expected decision on Bitcoin ETFs, raises concerns about the integrity of the regulatory process.
Specialized securities lawyers argue that the hack and the subsequent market reaction may have violated the new SEC rules implemented in July, which emphasize strict “cybersecurity risk management.”
While the sector learns about the decision on Bitcoin ETFs, the hacking scandal introduces an element of uncertainty.
Conclusions on the news: the importance of SEC approval of the Bitcoin ETF
In conclusion, the formal approval of Bitcoin Exchange-Traded Funds (ETFs) by the Securities and Exchange Commission (SEC) marks a crucial moment in the intersection between cryptocurrencies and traditional financial markets.
The green light for ETFs by important entities such as ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, and others signifies a significant regulatory change, allowing investors to have direct exposure to the price of Bitcoin without the complexities of ownership or self-custody.
The historic approval, after years of rejections by the SEC due to market manipulation and fraud concerns, reflects a change in perspective in the regulatory landscape.
The legal case won by Grayscale in August 2023 played a crucial role in forcing the SEC to reconsider its position, ultimately paving the way for this historic decision.
While the sector eagerly awaits the start of trading for these Bitcoin spot ETFs, attention is now shifting to their potential market impact and investor participation.
The estimates indicating a substantial influx of funds highlight the growing importance of cryptocurrencies in traditional finance.
With this regulatory turn, the cryptocurrency ecosystem continues its trajectory towards broader acceptance and integration into traditional financial frameworks, laying the groundwork for a new chapter in the evolving narrative of digital assets in global markets.
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