- The SEC, under Gary Gensler, approved several spot Bitcoin ETPs
- Despite approval, the SEC maintains a strict position on crypto-regulatory compliance
The U.S. Securities and Exchange Commission (SEC), under Chair Gary Gensler, has taken a significant yet cautious step in the realm of cryptocurrencies by approving a number of spot Bitcoin exchange-traded product (ETP) shares. However, Ethereum exchange-traded funds (ETFs) might not share the same fate.
The SEC’s approval comes with a clear caveat. It focuses on Bitcoin (BTC) and does not extend to the broader cryptocurrency market.
Scope and limitations of SEC’s approval
According to Gensler, the Commission’s approval limits itself to ETPs holding Bitcoin, a non-security commodity, and should not speak for a broader endorsement of cryptocurrencies or their underlying technology.
During a media briefing which revolved around his opinion on Ethereum ETFs, Gensler clearly said,
“As I said two weeks ago, that which we did with regard to bitcoin exchange-traded products is cabined to this one commodity non-security and shouldn’t be read to be anything other than that.”
On 10 January, the agency green-lit 11 spot Bitcoin ETFs in response to a ruling by a D.C. court panel of three judges. This mandated the SEC to reassess Grayscale’s application for a spot Bitcoin ETF.
Gensler commented on the same as well. He said,
“In that light, there’s also better disclosure. They’re listed on stock exchanges now rather than trading in over the counter markets. There were 10 or 11 that went live at the same time that brought a certain amount of competition. You’ve seen some competition that investors benefited from lower fees.”
Gensler’s skepticism involving crypto
Despite the approval, Gensler has been keen to clarify that the SEC’s action does not equate to an endorsement of Bitcoin. He reiterated the risks associated with Bitcoin and crypto-products. He also emphasized Bitcoin’s speculative nature and its use in illicit activities like ransomware, money laundering, sanction evasion, and terrorist financing.
Additionally, he contrasted Bitcoin with precious metals, which have consumer and industrial uses, highlighting the speculative and volatile nature of the cryptocurrency.
The SEC’s decision to allow the trading of spot Bitcoin ETP shares represents a cautiously optimistic step for the crypto-industry. However, the Commission’s stringent stance on the regulatory compliance of crypto-assets and its concerns about the broader market remain unchanged.
"As I said two weeks ago, that which we did with regard to bitcoin exchange traded products is cabined to this one commodity non-security and shouldn't be read to be anything other than that," SEC Chair Gary Gensler said when asked for his thoughts on ETH ETFs.…
— Wu Blockchain (@WuBlockchain) January 25, 2024
Is stringent crypto-regulation a thing of the past?
Gensler’s cautionary tone also reflects the SEC’s commitment to investor protection and market integrity. He highlighted the importance of full, fair, and truthful disclosure by sponsors of Bitcoin ETPs, ensuring that investors benefit from public registration statements and required periodic filings.
Furthermore, these products find their place on registered national securities exchanges, which have rules designed to prevent fraud and manipulation.
Finally, with big big-shots like Fidelity and BlackRock’s involvement and application for a spot Ethereum ETF, there is a glimmer of hope. Especially since there has been ongoing speculation about Ethereum ETFs being approved by May 2024.
