Crypto Scores Major Victory as SEC Approves Bitcoin ETFs

After weeks of anticipation, the Securities and Exchange Commission officially announced on January 10 that it had approved the listing and trading of multiple spot Bitcoin exchange-traded funds (ETFs).

The SEC approved applications from 11 financial firms looking to offer spot Bitcoin ETFs, including big-name asset management companies BlackRock, Invesco, Fidelity Investments and Franklin Templeton. It represented a huge win for the cryptocurrency industry and the opportunity to attract a new crop of investors by touting crypto as a more traditional investment. The hope for the crypto sector is that the structure of an ETF appeals to investors, institutions, and financial advisors as a more familiar and regulated way to get exposure to Bitcoin.

The decision also resolved issues surrounding the agency’s previous denial of an application from Grayscale Investments LLC to convert its $27 billion Bitcoin trust to an ETF – a move that later became the subject of litigation. After news of the SEC approving its application on January 10, Grayscale claimed bragging rights for having the first spot Bitcoin ETFs to begin trading.

News of the SEC’s official approval came after the market was rocked by a January 9 social media post on the SEC’s official X account falsely announcing approval of spot Bitcoin ETFs. Minutes later, the SEC said the post was unsanctioned and blamed it on a security breach. Although the ensuing chaos threw the market into a “Bitcoin frenzy,” the SEC announced official approval of the 11 applications the next day.

X blamed the hack on poor security practices at the SEC, noting its preliminary investigation showed the hack was the result of an unidentified individual obtaining control over a phone number associated with the SEC’s account through a third party. This wasn’t the first time the SEC faced a security breach: In 2019, nine individuals were charged with hacking into the agency’s EDGAR system and stealing material, nonpublic information to use for illegal trading purposes.

Despite the fanfare from crypto advocates, SEC Chair Gary Gensler downplayed the importance of the announcement. He stressed that the agency’s approval of the first U.S.-listed ETFs to track Bitcoin does not translate to an approval or endorsement of Bitcoin itself. “Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto,” Gensler said.

Looking ahead, spot Ethereum ETFs could turn into the next big thing in the crypto sphere. According to Coindesk, ether and native tokens of applications built on Ethereum surged the week of January 8 as traders bet on the likelihood of an ether ETF proposal following the approval spot Bitcoin ETFs. BlackRock in November filed a Form S-1 with the SEC for its iShares Ethereum Trust, a spot ether ETF, and Blackrock CEO Larry Fink recently said he “sees value” in an Ethereum ETF.