In a long-anticipated move, the Securities and Exchange Commission on Wednesday approved applications for 11 spot bitcoin ETFs, one day after it was forced to knock down a false report on its hacked X/Twitter social media account claiming such products were approved.
The approval was confirmed in a statement from SEC Chair Gary Gensler.
The approvals mark the reversal of years of rejections of similar products by the SEC. The agency previously rejected applications — including applications from asset managers that included Fidelity Investments and WisdomTree, both of which have now prevailed — citing concern about the potential for market manipulation. But in October, a federal court ruled that the SEC had been "arbitrary and capricious" in its decision to reject Grayscale's application to convert its flagship Grayscale Bitcoin Trust into an ETF and forcing the agency to reconsider.
In a statement published on the SEC's website Wednesday, Gensler cited the Grayscale ruling, writing that "Based on these circumstances ... I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares."
Yiannis Giokas, senior director at Moody's Analytics, said the sweeping approvals were a "significant step toward the institutionalization of cryptocurrency, expanding bitcoin's accessibility to a wider audience in a more regulated and simpler manner." He added that the ETFs could lead to an increased demand for bitcoin and improve market liquidity but risked exposing mainstream investors to volatility.
COMPANIES WEIGH IN
The 11 spot bitcoin ETFs that have been approved are ARK 21Shares Bitcoin ETF, Bitwise Bitcoin ETP Trust, Fidelity Wise Origin Bitcoin Trust, Franklin Bitcoin ETF, Grayscale Bitcoin Trust, Hashdex Bitcoin ETF, Invesco Galaxy Bitcoin ETF, iShares Bitcoin Trust, Valkyrie Bitcoin Fund, Wisdomtree Bitcoin Trust and VanEck Bitcoin Trust.
Investors months ago began predicting approval by Wednesday, the deadline for the SEC to either approve or deny a proposed rule change filed with it by the Cboe BZX Exchange to list and trade shares of the ARK 21Shares Bitcoin ETF.
"Today is a monumental day in the history of digital assets," Samir Kerbage, CIO of Hashdex, said in a statement provided by a spokesperson.
"The approval of 19b-4s marks the next phase for the industry by allowing U.S. investors to fully participate in the promise of bitcoin, and we are thrilled to play a leading role in this next wave of growth and innovation."
During a Jan. 10 appearance on Bloomberg ETF IQ, ARK Investment Management CEO Cathie Wood was asked about her expectations for the breakdown of flows into the ARK 21Shares Bitcoin ETF once it's approved.
"We're going after all of these categories, and of course our bread and butter historically has been retail, whereas 21Shares has been much more institutional," said Wood, who is also ARK's chief investment officer and founder. Wood was asked what she expected the initial breakdown between retail and institutional investors to be and how that might look in six months' time.
"We're even speaking with state pension funds as well as even some treasurers. So, the interest is far and wide."
When it comes to institutions, however, "it's not going to be overnight," she said.
"There are so many boxes to check, so much due diligence," Wood said. "And if the approval takes place, that is for many of them, the starting point for due diligence, so I wouldn't expect overnight success."
The days leading up to the SEC's long-awaited greenlighting of spot bitcoin ETFs saw a furious fee battle erupt among firms seeking to offer the products.
Fees vary depending on the fund, ranging from 0.2% to 1.5%.
"This the first time a fee war has broken out before they've even launched," Bloomberg Intelligence senior ETF analyst Eric Balchunas said during the show. "This is wild."
In addition to competition over fees, firms are looking for other ways to differentiate their products. A VanEck spokesperson said the firm has committed to donating 5% of the VanEck Bitcoin Trust's profits to Bitcoin Core developers, who maintain the code running the bitcoin blockchain. Grayscale also confirmed its approval through a spokeswoman.