U.S. Investors Can Now Access Spot Bitcoin Exchange-Traded Funds (ETFs)
The U.S. Securities and Exchange Commission (SEC) has approved eleven spot Bitcoin exchange-traded funds. Here’s what you need to know.
What Are Bitcoin ETFs?
Spot Bitcoin ETFs are exchange-traded funds in which issuers and related parties hold Bitcoin in a fund and divide it into shares for investors to purchase.
Bitcoin ETFs are ideal for those who primarily intend to earn profits on their investment; they provide similar assurances as other traditional financial products.
However, this approach is different from standard Bitcoin investments. In standard crypto investing, retail crypto exchanges hold crypto on behalf of their customers and allow investors to withdraw crypto to their own wallet. This is more appropriate for investors who do not solely intend to earn profits, but also intend to spend their cryptocurrency and are capable of maintaining their own account or wallet.
Which ETFs Have Been Approved?
The U.S. Securities and Exchange Commission (SEC) issued an approval order indicating that eleven funds have been approved. The successful applicants are Grayscale, Bitwise, Hashdex, BlackRock (iShares), Valkyrie Invest, ARK and 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, and Franklin Templeton.
All successful funds were collectively approved on Wednesday, Jan. 10. The funds began to trade on various platforms one day later on Thursday, Jan. 11.
Where Can You Invest In Bitcoin ETFs?
Spot Bitcoin ETFs trade variously on three exchanges: Cboe BZX, Nasdaq, and NYSE Arca. However, retail investors in the U.S. can invest through brokerages.
Brokerages that have announced support include Robinhood, Schwab.com and thinkorswim, and Fidelity Investments. Interactive Brokers and Morgan Stanley’s E-trade reportedly provide access to spot Bitcoin ETFs as well.
Other platforms are restricting access to spot Bitcoin ETFs. Vanguard has reportedly blocked access entirely. Additionally, Citigroup, Merrill Lynch, State Street Corp., UBS Group AG and Edward Jones reportedly have blocked access, restricted access to certain customers, or are evaluating the situation, according to ETF.com.
Who Was Responsible for Approval?
The U.S. Securities and Exchange Commission (SEC) is the government agency responsible for approving spot Bitcoin ETFs and similar funds.
Though numerous SEC members were involved in the months-long application process, a small number of top SEC members ultimately voted on the decision. Three of the SEC’s five voting members voted in favor of approving those funds. SEC chair Gary Gensler and commissioners Hester Peirce and Mark Uyeda voted in favor of approval. Commissioners Caroline A. Crenshaw and Jaime Lizárraga voted against approval.
Does the SEC Approve of Bitcoin and Crypto?
SEC chair Gary Gensler stated that his agency’s approval of the various Bitcoin funds does not represent any sort of broader approval of cryptocurrency. He wrote: “while we approved the listing and trading of certain spot bitcoin [exchange-traded product] shares today, we did not approve or endorse bitcoin.”
Gensler went on to emphasize Bitcoin’s use in illegal transactions and urged investors be cautious about the “myriad risks” linked to Bitcoin and related products.
Why Did the SEC Approve ETFs?
Gensler said that although the SEC has rejected similar applications in the past, a recent ruling regarding one applicant led the SEC to approve the latest batch of applications. That ruling found that the SEC had failed to adequately explain its reasons for disapproving a proposal from Grayscale Investments.
Gensler said that this legal ruling in part made approvals the “most sustainable path forward,” in spite of his apparent concerns around crypto.
Are the Funds ETFs or ETPs?
The SEC referred to each ETF as an exchange-traded product (ETP) in its approval order and in various member statements.
The distinction is not entirely clear, as exchange-traded funds are a type of exchange traded product. However, the difference could affect investor safety. One SEC commissioner, Caroline A. Crenshaw, wrote that the current products are “not ETFs registered under the Investment Company Act of 1940” and suggested that the “ETF” label implies protections that do not exist in the current products.
However, the asset managers responsible for the funds have largely referred to their products as exchange-traded funds. Five of the eleven successful asset managers included “ETF” in the name of their fund. Other asset managers have called their offering an ETF in public materials, including Grayscale and BlackRock.
Are Other Crypto ETFs Available?
The SEC has previously approved Bitcoin futures ETFs and Ethereum futures ETFs, largely around October 2021 and October 2023 respectively.
Additionally, several applicants currently have spot Ethereum (ETH) ETF applications pending. It is unclear whether the SEC will choose to approve those funds, though it is required to reach a decision on the first of those applications in May 2024.
