The U.S. Securities and Exchange Commission (SEC) has finally approved the first regulated spot Bitcoin exchange-traded funds (ETFs) in the United States. This significant development comes just a day after a misleading tweet from the SEC’s official account caused market turmoil.
On Jan. 10, the SEC greenlit the 19b-4 applications from a slew of major financial players, including ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, Grayscale, Bitwise, Hashdex, and Franklin Templeton. This move authorizes the listing and trading of spot Bitcoin ETFs on various exchanges. An initial posting of the filing on the SEC website was briefly replaced by an ‘Error 404’ message, before being made accessible again through an alternate link.
This landmark decision marks the first time a regulated U.S. exchange-traded product will offer investors direct exposure to Bitcoin’s price, eliminating the need for direct purchase or self-custody of the cryptocurrency. Instead, investors can acquire shares in ETFs with Bitcoin as the underlying asset.
There was some confusion initially regarding the ‘Error 404’ message that appeared after the SEC’s approval of the 11 spot Bitcoin ETF filings. ETF analyst James Seyffart speculated on X (formerly Twitter) that this could have been either an accidental early release or a result of overwhelming site traffic. He anticipated that the document would be reposted regardless.
The journey to this approval has been a long one, stretching back to 2013 when Cameron and Tyler Winklevoss first sought to launch a Bitcoin ETF. Until now, the SEC had consistently rejected such proposals, citing concerns about market manipulation and fraud. However, the regulatory body revisited its stance following a successful legal challenge by Grayscale in August 2023, which led to the overturning of the SEC’s previous denial.
With the approval of spot Bitcoin ETFs, the financial industry is now keenly observing when these ETFs will commence trading. Estimates suggest significant inflows into these products, with Galaxy Research’s Alex Thorn predicting up to $14 billion in the first year and VanEck forecasting about $2.4 billion in the first quarter of 2024 alone.
These ETFs, which require the SEC’s approval of both the S-1 (or S-3) and 19b-4 forms, represent a crucial evolution in the cryptocurrency market. The recent filing amendments by ten issuers on Jan. 8, where they disclosed their intended fees, underscore the competitive landscape of this new investment product. BlackRock, the world’s largest asset manager, announced a fee of 0.2% until its fund reaches $5 billion in assets under management, with others like Bitwise, Ark 21Shares, and VanEck setting their fees slightly higher. Grayscale stands out with the highest fee rate at 1.5%.