The US Securities and Exchange Commission (SEC) has approved the listing and trading of several spot bitcoin Exchange-Traded Product (ETP) shares.
The regulator move is expected to make bitcoin investing more accessible to Main Street investors without requiring them to own the digital asset directly.
The decision marks a shift from previous disapprovals, which numbered over 20, under former Chair Jay Clayton until March 2023. The change is attributed to a ruling by the US Court of Appeals for the District of Columbia, which found shortcomings in the Commission’s reasoning for disapproving the listing and trading of Grayscale’s proposed ETP.
Gary Gensler, the current SEC Chairperson, cited altered circumstances and the court’s decision to vacate the Grayscale Order as the basis for approving the spot bitcoin ETP shares. The Commission emphasises its merit-neutral approach, evaluating rule filings based on consistency with the Exchange Act and regulations without taking a stance on specific companies or assets.
Gensler clarified that the approval is specific to ETPs holding bitcoin as a non-security commodity, with no implications for the SEC’s willingness to approve listing standards for crypto asset securities. “The Commission is merit neutral and does not take a view on particular companies, investments, or the assets underlying an ETP,” he said.
What is the difference between ETF and ETP?
ETPs are a broader category that encompasses several investment instruments. The ETPs cover a more comprehensive range of products, such as ETFs, Exchange Traded Notes (ETNs), and Exchange Traded Commodities (ETCs). Therefore, ETFs are a subset of ETPs
Protection for investors
Investors will have added protections with sponsors of bitcoin ETPs required to provide comprehensive and truthful disclosures, Gensler confirmed. These ETPs will be listed and traded on registered national securities exchanges, subject to rules preventing fraud and manipulation. The Commission will investigate any fraud or manipulation involving social media platforms. “Such regulated exchanges also have rules designed to address certain conflicts of interest and protect investors and the public interest,” Gensler stated.
“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” he added.
Existing rules and standards, such as Regulation Best Interest and fiduciary duty under the Investment Advisers Act, will apply to purchasing and selling approved ETPs. Commission staff is concurrently reviewing registration statements for ten spot bitcoin ETPs to ensure a level playing field for issuers.
With a current market cap of approximately $900 billion, Bitcoin has experienced price volatility over its 15-year history. After reaching an all-time high of nearly $69,000 in November 2021, it dropped below $17,000 during the “crypto winter” of 2022.
It has recently traded above $45,000 leading up to the SEC’s decision. Following the news, the price of bitcoin increased by 0.3% to nearly $46,000. The FBI is investigating a hack on the SEC’s account that posted a fake announcement about approving ETFs holding bitcoin.
