SEC Opens Floodgates for Crypto Investors by Okaying First Bitcoin ETFs

The Securities and Exchange Commission reluctantly approved the first-ever exchange traded funds (ETFs) for bitcoin on Wednesday, potentially extending a rally for the cryptocurrency.

The move, which the agency said was forced by the courts, opens the floodgate for some of the world's largest money managers to open funds that directly hold bitcoin. It also allows retail investors to trade bitcoin in their brokerage accounts as easily as they buy and sell stocks, bonds and mutual funds.

The SEC has slapped down applications for more than 20 crypto ETFs since 2018. A federal appeals court in Washington, D.C, said the Commission failed to adequately explain why it rejected the application of one fund proposed by Grayscale and sent the matter back to the agency, Chair Gary Gensler said in a statement.

"Based on these circumstances ... I feel the most sustainable path forward is to approve the listing and trading" of the ETFs, Gensler said, adding that the order doesn't in any way "signal the Commission’s willingness to approve listing standards for crypto asset securities"

Funds run by Grayscale, Bitwise and Hashdex could begin trading as early as Thursday. Eight other companies have also submitted applications, including the world's largest money manager, BlackRock, Cathie Wood’s ARK Investment Management, Invesco and the crypto asset manager 21Shares.

Ark CEO Wood called the SEC's approval "a green light for institutions."      

" We’ve been talking to quite a few of them, and they’re much more interested now that the SEC effectively is paving the way,” she said in a CNBC interview on Monday.

Before the SEC's approval, investment companies were already engaging in a fee war to attract investors with companies such as Invesco, Bitwise, Valkyrie and WisdomTree amending their applications to lower their fees.

Bitcoin was trading nearly 2% lower on Wednesday evening at about $45,712.

Bitcoin has been on a roll as investors anticipated the SEC's approval for bitcoin ETFs, rising above $45,000, its highest level in about two years. The crypto coin more than than doubled last year when BlackRock first put up its application.

The SEC's move marks a turnaround for the agency which has long cautioned against the potential for fraud and market manipulation with bitcoin ETFs. Signs of funny business already emerged Tuesday evening when Chairman Gary Gensler said the agency's social media account X was "compromised"  after an unauthorized post announced the agency had approved bitcoin ETFs.

"The unauthorized tweet regarding bitcoin ETFs was not made by the SEC or its staff," an SEC spokesman said in an email to The Messenger.