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Why SEC’s Spot Bitcoin ETF approval a big win for the industry

  • The U.S. Securities and Exchange Commission (SEC) finally approved the spot Bitcoin ETFs at 9:30 pm UTC on 10 January.
  • A spot Bitcoin ETF would allow investors to gain exposure to the cryptocurrency market through their existing brokerage accounts, making it as simple as buying a stock.
  • SEC Chair Gary Gensler, however, warned investors to remain cautious while investing in cryptocurrencies.

The much-awaited moment is when the U.S. Securities and Exchange Commission (SEC) on 10 January finally approved the spot Bitcoin ETFs —the SEC approved all 13 applications to create a spot Bitcoin ETF, thereby heralding a new mechanism that will allow the deep-pocketed institutions to gain Bitcoin exposure.

With the landmark event, Bitcoin, for the first time, allows investors to get direct exposure to the price of Bitcoin without requiring them to buy it or worry about self-custody. Investors will buy shares in ETFs with Bitcoin as its underlying asset.

Although asset managers had previously applied for Bitcoin ETFs, the SEC rejected them, stating that it would lead to market manipulation and expose the investors to market risks. However, since one of the courts found the SEC was wrong, there has been a significant change in the SEC’s thinking since August.

Industry celebrates in unison

The industry bigwigs soon celebrated the landmark events in chorus, terming it a “historic” moment. Ripple CEO Brad Garlinghouse lauded the SEC’s decision by calling it a pivotal moment in the industry. He said, “The significance of this moment cannot be overstated. Congrats to all who have worked to get Bitcoin spot ETFs approved! Today’s news further legitimizes crypto as an asset class. I expect this will be yet another catalyst for institutional investment/adoption, ideally leading the industry to focus outside primarily speculative to broader real-world use cases, underpinning that legitimization.”

BTC Markets CEO Caroline Bowler believed that approval was inevitable. “The approval of 11 bitcoin ETFs in the U.S. marks a pivotal moment for the cryptocurrency landscape. This further opens cryptocurrency to retail and institutional investors via a traditional financial product. It is reasonable to assume that this will generally expand crypto markets, as liquidity follows utility. So, while this is a historic day for the industry, the impacts will be increasingly felt over time,” Bowler said.

Larry Fink, the CEO of the world’s largest asset manager, BlackRock, has said the firm filed to list a bitcoin ETF last year specifically because there was clear customer demand for something like it. That decision opened the floodgates, with a number of competing applications soon following.

Justin Arzadon, Head of Digital Assets at Betashares, echoed similar sentiments: “The move to approve a spot bitcoin ETF will finally provide US-based investors with an option to invest in Bitcoin via a familiar ETF structure. The anticipated flows into US-traded spot bitcoin ETFs in the initial days after launch are expected to be significant and would serve as an endorsement of the global investor preference for ETFs over other investing structures.”

Gary Gensler still has reservations about Bitcoin and crypto industry

While the industry is over the moon with the decision, the SEC Chair Gary Gensler warned about investing in Bitcoin. In a statement, SEC Chair Gary Gensler said that even though they have approved it, investors would do well to remain cautious in investing in cryptocurrencies.

“While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” Gensler said in the statement.

Gensler also noted that while the SEC has approved commodity ETFs, Bitcoin is far different, saying it is “primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing,” he added.

Why is it such a big deal?

For starters, it’s a big win for the crypto industry. For over a decade now, the crypto industry has been trying to prove its legitimacy, and this approval will go a long way in pushing Bitcoin further into the mainstream. Besides, it’s also a big morale booster for the industry amid the tug-of-war between the crypto industry and SEC, which has been cracking down on the sector.

Having said that, the pressure would be now on the regulators to form stricter laws to safeguard investor’s interests in the case of malpractice.

All in all, the approval of a Bitcoin Exchange-Traded Fund (ETF) by the U.S. Securities and Exchange Commission (SEC) marks a significant milestone in the journey of mainstream acceptance and integration of cryptocurrencies into traditional financial markets. This decision represents a crucial step towards legitimizing and recognizing the legitimacy of Bitcoin as a legitimate asset class. The SEC’s approval of a Bitcoin ETF provides investors with a regulated and secure avenue to gain exposure to the digital asset, potentially attracting a broader range of market participants.

Moreover, the green light for a Bitcoin ETF reflects a growing acknowledgement by regulatory authorities of the evolving landscape of financial technology. The decision not only signals a maturation of the cryptocurrency market but also demonstrates the willingness of regulators to adapt to the changing dynamics of the global financial ecosystem. By providing a regulated investment vehicle for Bitcoin, the SEC’s approval may foster increased investor confidence and participation in the digital asset space.

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