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SEC approves new bitcoin funds in move that could spur more investment in the digital currency

Published:Wednesday | January 10, 2024 | 8:19 PM

An advertisement of Bitcoin, one of the cryptocurrencies, is displayed on a building in Hong Kong on November 18, 2021. (AP Photo/Kin Cheung, File)

NEW YORK (AP) — The Securities and Exchange Commission on Wednesday reluctantly approved the first exchange-traded funds that hold bitcoin, saying it is still deeply sceptical about cryptocurrencies and that its decision did not mean it approves or endorses bitcoin.

The SEC said it gave the green light to 11 exchange-traded funds for bitcoin even though it only faced a deadline for one application.

The agency said that would provide competition and a “level playing field.”

Bitcoin ETFs could open the door to cryptocurrencies to many new investors who don’t want to take the extra steps involved in buying actual bitcoin.

It’s a major win for Wall Street, particularly trillion-dollar fund managers like BlackRock, Fidelity Investments and Invesco that have pushed hard to get the SEC to approve their applications.

It’s also a win for the cryptocurrency industry, which has needed a win after nearly two years of turmoil that has resulted in the failure of several crypto firms, most notably FTX in November 2022.

The SEC’s approval, however, was lukewarm at best.

Gary Gensler, the agency’s chairman, has repeatedly said cryptocurrencies need more regulation and investor protections.

“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” Gensler said.

Other commissioners expressed alarm that the SEC agreed to approve the funds.

“I am concerned that these products will flood the markets and land squarely in the retirement accounts of US households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets,” Commissioner Caroline Crenshaw said in her dissent.

An exchange-traded fund is an easy way to invest in assets or a group of assets, like gold, junk bonds or bitcoins, without having to directly buy the assets themselves. Cryptocurrency advocates hope the development thrusts the once niche and nerdy corner of the Internet even further into the financial mainstream. ETFs can be purchased quickly with any brokerage and trade on an exchange like the Nasdaq stock market.

The regulatory greenlight has been anticipated for several months and the price of bitcoin has jumped about 70% since October as crypto investors speculated the broad use of bitcoin ETFs would drive up demand for the cryptocurrency. The price of etherium, the second-most popular cryptocurrency, has also risen on speculation that fund managers will create ETFs around it.

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