The cryptocurrency ecosystem is celebrating as it is one step closer to becoming a part of the mainstream financial world. The US has become the ninth country to approve a spot Bitcoin exchange-traded-fund (ETF) following the Security and Exchange Commission‘s (SEC) latest announcement.
On 10 January 2024, the US regulator approved the listing and trading of a number of spot bitcoin exchange-traded product (ETP) shares. This means that US investors, both institutional and retail, have a clear way to track the movements of the crypto and can make purchases without having to set up an account or digital wallet with an unregulated exchange. Nor do they need to rely on the more expensive Bitcoin futures ETFs (which were approved by the SEC in 2021).
The announcement was made following an uncertain 24 hours in which the SEC’s X account was hacked and a tweet was made saying that the spot Bitcoin ETF approval had been made, on 9 January 2024. This caused the price of Bitcoin to jump around 2.5 per cent. This caused a $40billion swing in the combined value of total Bitcoin.
Following its legitimate approval though, on January 11, 2024, Bitcoin had a value of $47,000. While it’s still a long way off from its highest valuation of $69,000 in November 2021, it is almost three times its worth ($16,000) in December 2022, following the FTX collapse.
From the Commission’s point of view
Crypto enthusiasts have long called for some form of spot Bitcoin approval from the SEC. However, the Commission had disapproved 20 filings for an ETP between 2018 and March 2023. Discussing why approval was given this time, the SEC’s chair, Gary Gensler said: “The US Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order).
“The court therefore vacated the Grayscale Order and remanded the matter to the Commission. Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot Bitcoin ETP shares.”
Having explained how investors would be protected under the new ruling, Gensler concluded: “Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast, Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.”
Hester M. Pierce, commissioner at the SEC took a more positive outlook on the approval saying: “Although this is a time for reflection, it is also a time for celebration. I am not celebrating Bitcoin or Bitcoin-related products; what one regulator thinks about Bitcoin is irrelevant. I am celebrating the right of American investors to express their thoughts on Bitcoin by buying and selling spot Bitcoin ETPs.
“And I am celebrating the perseverance of market participants in trying to bring to market a product they think investors want. I commend applicants’ decade-long persistence in the face of the Commission’s obstruction.”
Turning a new page for crypto
Once the approval was made official, both big and small names in the crypto industry were quick to celebrate the news. Many believe the decision will usher in a new wave of crypto players with it seemingly becoming a more accepted mainstream asset.
Commenting on this, Richard Teng, CEO of global crypto exchange Binance said: “The approval marks a new level of acceptance, maturity and popularisation of the active crypto market. It makes the industry more credible and opens up the potential for more innovation.
“Furthermore, the approval will attract more investors and liquidity. While it is not easy to anticipate the scale of new entrants and market dynamics (which are subject to market dynamics themselves), it is useful to note that the introduction of gold ETFs in 2004 resulted in seven years of positive price action. Coupled with this year’s Bitcoin Halving event, these events could create a dynamic market for Bitcoin.”
“This moment cannot be overstated”
Celebrating the news, Brad Garlinghouse, CEO of crypto and blockchain solutions provider, Ripple said on X:
The significance of this moment cannot be overstated.
Congrats to all who have worked to get Bitcoin spot ETFs approved!
Today’s news is further legitimization of crypto as an asset class. I expect this will be yet another catalyst for institutional investment / adoption,… https://t.co/3jlqQYm0Xl
— Brad Garlinghouse (@bgarlinghouse) January 10, 2024
Mainstream acceptance
Further elaborating on what the approval means, Sheila Warren, CEO of the Crypto Council for Innovation, the global alliance working to advance innovation and inclusive regulation, said: “The introduction of a spot Bitcoin ETF isn’t just about market dynamics, it’s a catalyst for regulatory evolution. It necessitates a framework that accommodates the unique nature of crypto, potentially leading to more appropriate and informed regulatory policies in the crypto space.
“A spot Bitcoin ETF is a precursor to a plethora of innovative financial products and services that straddle the line between traditional finance and cryptocurrencies, expanding the horizon for what’s possible within the crypto ecosystem. The ripple effects of a spot Bitcoin ETF could lead to a recalibration of market dynamics, aligning them closer to traditional financial markets, yet retaining the distinct characteristics of the crypto world.”
A fundamental change to the industry
Every time the crypto market crashes, the naysayers come out in full force declaring the era of crypto to be over. However, this has yet to be the case. With the SEC now approving spot Bitcoin ETFs, this is arguably even less likely to happen.
Explaining why crypto is here to stay, Eric Demuth, co-founder and CEO of investment platform Bitpanda said: “Whatever the cause, the approval of a Bitcoin Spot ETF is a huge milestone. From now on, long-term capital from institutional investors will flow into the crypto market. This decision will fundamentally change the industry.
“Until now, many institutional investors were unable to operate in the crypto sector within their regulatory framework, as they have to invest in traditional financial products. The Bitcoin ETFs that are now available will be a hugely important tool for institutions and major banks in the US.
“I believe that the approval of a Bitcoin Spot ETF will further encourage the mass adoption of crypto-assets by institutional investors in the US. Institutional investors may be more willing to invest in Bitcoin if they have access to it through investment products such as ETFs. This is the next step into mainstream finance. Crypto is here to stay.”
An investment just like a gold ETF
Throughout 2023, crypto regulation was a hot topic with regulators clashing with exchanges on a common basis. However with regulations becoming established, this move by the SEC is yet another way to show how crypto is becoming widely accepted as a legitimate asset explains Sasha Skoryk, head of banking at Clear Junction, the global payments solution provider.
“As a leading B2B payments platform that’s committed to enabling fiat and crypto transfers in regulated environments, Clear Junction recognises the transformative power of these approved Bitcoin ETFs in giving greater legitimacy to crypto in tandem with regulatory frameworks being adopted worldwide.
These developments will give much-needed clarity, reassurance and confidence for institutional and retail investors in crypto as a legitimate and trustworthy instrument. Banks, financial institutions and others that have previously been wary of engaging with crypto can move forward with the knowledge that crypto is now a mainstream investment instrument just like a gold ETF or a NASDAQ-tracker fund.”
Francis Bignell
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