As reported by Cointelegraph, in a significant development for the cryptocurrency industry, the United States' first regulated spot Bitcoin exchange-traded funds (ETFs) have been officially approved by the U.S. Securities and Exchange Commission. The approval was preceded by a false announcement of approval posted on the SEC's official X account a day earlier, which led to some market volatility and emotional swings for investors who had been awaiting the outcome of the SEC’s decision.
On January 10, 2022, the U.S. Securities and Exchange Commission approved the 19b-4 applications from a number of companies including ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, Grayscale, Bitwise, Hashdex, and Franklin Templeton. This approval allows for rule changes that enable a spot Bitcoin ETF to be listed and traded on the respective exchanges. Interestingly, the filing was briefly available for download on the SEC website before an "Error 404" message appeared. It later became live through a different link.
This historic approval by the U.S. Securities and Exchange Commission paves the way for the first regulated exchange-traded product in the United States that gives investors direct exposure to the price of Bitcoin without requiring them to buy it or worry about self-custody. This development is significant as investors will be able to buy shares in ETFs that hold Bitcoin as its underlying asset. This means that investors can gain exposure to Bitcoin without having to go through the process of buying and storing the cryptocurrency themselves.
There was some confusion surrounding the 'Error 404' message that appeared on the SEC's website in relation to the approval of 11 spot Bitcoin ETF filings. It was unclear whether the message was due to an overload in site traffic or if the SEC had pulled the document. ETF analyst James Seyffart posted on X (formerly Twitter) that the commission may not have intended to make public the approval document when it did, but it would likely repost it anyway.
The approval of the ETF is a significant milestone for Cameron and Tyler Winklevoss, who first applied for the Winklevoss Bitcoin Trust more than 10 years ago in 2013. The SEC had previously denied all spot Bitcoin ETF requests, citing concerns over potential market manipulation and fraud.
The SEC's decision to approve the Bitcoin ETF comes after Grayscale's court victory in August 2023. The court overturned the SEC's denial of Grayscale's application to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF. This decision likely forced the SEC to revisit its position on Bitcoin ETFs.
Now that the spot Bitcoin ETFs have been approved, the industry is eagerly waiting for their trading to begin.
According to Alex Thorn, the head of digital at Galaxy Research, spot Bitcoin ETFs could see inflows of up to $14 billion in the first year alone. This is a significant amount and highlights the potential demand for these products. Similarly, global fund manager VanEck has estimated that roughly $2.4 billion could flow into spot Bitcoin products in the first quarter of 2024. This is a testament to the growing interest in Bitcoin and the potential for ETFs to provide greater accessibility to the cryptocurrency market.
Launching a spot Bitcoin ETF in the United States is a complex process that requires approval from the SEC. The issuers must file both the S-1 (or S-3) and 19b-4 forms, which outline the details of the ETF and its operation. These documents are reviewed by the SEC, which assesses the potential risks and benefits of the ETF before making a decision on whether to approve it. The SEC's approval of the Bitcoin ETFs is therefore a significant milestone for the issuers and the cryptocurrency industry as a whole.
On January 8th, ten issuers filed their final amended S-1 and S-3 filings, disclosing the fees they intend to charge for their respective Bitcoin ETFs. BlackRock, the world's largest asset manager, plans to charge 0.2% fees until the fund reaches $5 billion in assets under management (AUM). Bitwise follows closely behind at 0.24%, while Ark 21Shares and VanEck have slightly higher fees at 0.25%.
Ark 21Shares has announced that it will waive all fees for the first six months or until the product reaches $1 billion AUM. This is a notable move and could attract investors looking for lower fees. Grayscale currently has the highest-fee Bitcoin ETF product, with a 1.5% fee rate on its prospective investors. The fees charged by these issuers will likely be a key factor in deciding which ETFs investors choose to invest in.
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