Investors looking to invest in bitcoin can now do so through exchange-traded products (ETP) as the U.S. Securities and Exchange Commission (SEC) approved the first-ever spot bitcoin ETPs on Wednesday.
It marks the end of a 10-year fight to get such products approved and the beginning of a new era for investors as they can now invest directly in bitcoin through these ETPs, which trade like stocks or ETFs. That’s because these ETPs hold bitcoin as their underlying assets, so the investor doesn’t own the bitcoin in these products. However, investors can win or lose from the price movements of the underlying assets.
Previously, investors could only invest in bitcoin by either buying some directly or through funds that invested in bitcoin futures, or derivatives of bitcoin.
Eleven funds are approved
In this first batch of approvals, the SEC gave the okay to 11 spot bitcoin ETFs, some of them from major money managers like BlackRock (NYSE:BLK), ARK Invest, Franklin Resources (NYSE:BEN), Invesco (NYSE:IVZ), and Fidelity Investments.
The 11 bitcoin ETPs are:
- iShares Bitcoin Trust (NASDAQ:IBIT)
- Grayscale Bitcoin Trust (NYSEARCA:GBTC)
- ARK 21Shares Bitcoin ETF (NYSEAMERICAN:ARKB)
- Bitwise Bitcoin ETP Trust (NYSEAMERICAN:BITB)
- WisdomTree Bitcoin Trust (CBOE:BTCW)
- Fidelity Wise Origin Bitcoin Trust (NYSEAMERICAN:FBTC)
- VanEck Bitcoin Trust (NYSEAMERICAN:HODL)
- Invesco Galaxy Bitcoin ETF (NYSEAMERICAN:BTCO)
- Valkyrie Bitcoin Fund (NASDAQ:BRRR)
- Hashdex Bitcoin ETF (NYSEAMERICAN:DEFI)
- Franklin Bitcoin ETF (CBOE:EZBC).
All of these funds are now trading on their various exchanges.
The SEC voted 3-2 in favor of the approvals with Chair Gary Gensler joining Hester Peirce and Mark Uyeda in favor. Commissioners Caroline Crenshaw and Jaime Lizárraga voted against it.
Since 2018, the SEC has voted down more than 20 filings for spot bitcoin ETPs. However, as Gensler explained in a statement, circumstances changed after Grayscale sued the SEC over its disapproval of its spot-bitcoin filing in 2022 and won.
“The U.S. 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,” Gensler said on Wednesday. “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.”
With the approval, Grayscale converted its existing futures-based Grayscale Bitcoin Trust into a spot bitcoin ETP trading under the same ticker.
Gensler added that this approval doesn’t signal an endorsement of bitcoin.
“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin,” he explained. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
What this approval means for investors
Wednesday’s historic approval should be a game changer, as it could open the floodgates to new retail and institutional investors and normalize bitcoin as an asset class. It potentially opens the door for more bitcoin ETPs and those of other crypto products, although Gensler said the approvals Wednesday were “cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.”
Many of the approved ETPs have slashed their fees on an introductory basis, including the one from Invesco, which is waiving the fee for its new bitcoin ETP on assets up to $5 billion for the first six months.
“We have a high conviction that digital assets have the potential to be a transformative asset class and believe bringing BTCO into a fully transparent and regulated market truly helps to further democratize the asset class,” said Brian Hartigan, global head of ETF investments at Invesco.
ARK Invest, Bitwise, Fidelity and Valkyrie are also temporarily waiving their fees, according to Investor’s Business Daily.
Unsurprisingly, the price of bitcoin was jumping higher on Thursday, up by about 1% on the day to roughly $46,000.
