The US regulator has approved exchange-traded funds that invest directly in Bitcoin for the first time, in a move considered a historic event for the nearly $1.7 trillion digital asset sector, and will increase access to the largest cryptocurrency on Wall Street and beyond.
The US Securities and Exchange Commission, whose three-part mandate includes protecting investors, authorized 11 funds to begin trading on Thursday.
The approvals also mark a rare capitulation by the SEC after more than a decade of opposition, since Tyler and Cameron Winklevoss first proposed launching a Bitcoin exchange-traded fund in 2013.
BlackRock's surprise order last June, followed by an appeals court ruling that described the rejection of a different order as arbitrary and capricious, led to a sharp rise in cryptocurrency prices on speculation that US regulators would finally give their approval to the instrument.
The decision comes one day after a fake post on the SEC's X account claimed the agency approved ETFs. The regulator later said the account had been hacked, causing Bitcoin's price to fluctuate widely.
Bitcoin price rose less than 1% to $45,729 after approvals were issued.
A turning point in the cryptocurrency sector
The original cryptocurrency, which plunged 64% in 2022, more than doubled in price in 2023 due largely to speculation that the US Securities and Exchange Commission will eventually approve ETFs that will allow investors to gain exposure to cryptocurrency in private, traditional brokerage accounts. Instead of one of the local crypto startups that has come under increasing government scrutiny after a series of scandals and bankruptcies have hit the sector.
Cryptocurrency proponents have argued for years that a so-called spot fund that invests directly in Bitcoin would be beneficial to investors and help bring the industry closer to the more regulated world of traditional finance. The fund is also considered a maturation stage for this relatively nascent industry, as skirmishes with regulators reached a peak after the collapse of Sam Bankman-Fried's FTX empire highlighted the risks inherent in the sector.
The historic decision comes after Grayscale Investments achieved a major victory over the Securities and Exchange Commission. A federal appeals court overturned the denial of Grayscale's request to convert her Bitcoin fund into an exchange-traded fund. The court described this rejection as arbitrary and capricious because the Commission failed to explain its different treatment of similar products. It should be noted that ETFs holding Bitcoin futures contracts have been approved in 2021.
2023 filings from Wall Street heavyweights such as BlackRock, Invesco, and Fidelity have led some analysts to suggest that the SEC may be more open to a Bitcoin fund after years of failed launches by various issuers. BlackRock, for example, has a unique track record of launching ETFs, and many saw its entry into the race as a harbinger of its eventual debut.
