- The SEC, led by Gary Gensler, has approved several spot Bitcoin ETPs
- Despite approval, the SEC maintains a strict stance on crypto regulatory compliance
The US Securities and Exchange Commission (SEC), led by Gary Gensler, has taken an important but cautious step in the cryptocurrency space by approving a number of spot Bitcoin exchange-traded product (ETP) stocks. However, Ethereum exchange-traded funds (ETFs) may not suffer 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 Approval
According to Gensler, the Commission’s approval is limited to ETPs holding Bitcoin, a non-security item, and should not advocate broader approval of cryptocurrencies or their underlying technology.
During a media briefing that revolved around his views on Ethereum ETFs, Gensler stated clearly:
“As I said two weeks ago, what we did with respect to bitcoin exchange-traded products is limited to this one product, non-security, and should not be read as anything other than that.”
On January 10, the agency greenlighted 11 spot Bitcoin ETFs in response to a ruling by a three-judge panel in DC. This ordered the SEC to reassess Grayscale’s application for a spot Bitcoin ETF.
Gensler noted the same thing. He said,
“In that light, there is also better disclosure. They are now listed on stock exchanges instead of trading on over-the-counter markets. There were 10 or 11 going live at the same time, which created a degree of competition. You have seen competition where investors benefited from lower costs.”
Gensler’s skepticism regarding crypto
Despite the approval, Gensler wanted to make it clear that the SEC’s action does not amount to an endorsement of Bitcoin. He reiterated the risks associated with Bitcoin and crypto products. He also highlighted the speculative nature of Bitcoin and its use in illegal activities such as ransomware, money laundering, sanctions evasion and terrorist financing.
Furthermore, he contrasted Bitcoin with precious metals, which have both consumer and industrial uses, highlighting the speculative and volatile nature of the cryptocurrency.
The SEC’s decision to allow trading of spot Bitcoin ETP shares represents a cautiously optimistic move for the crypto industry. However, the Commission’s tough stance on crypto-asset regulatory compliance and its concerns about the broader market remain unchanged.
“As I said two weeks ago, what we did with respect to bitcoin exchange-traded products is limited to this one product, non-security, and should not be read as anything other than that,” said SEC Chairman Gary Gensler when asked for his opinion on ETH ETFs.…
— Wu Blockchain (@WuBlockchain) January 25, 2024
Is strict crypto regulation a thing of the past?
Gensler’s cautionary tone also reflects the SEC’s commitment to investor protection and market integrity. He emphasized the importance of full, fair and truthful disclosure by sponsors of Bitcoin ETPs so that investors can benefit from public registration statements and required periodic filings.
Moreover, these products find their place on registered national stock exchanges, which have rules to prevent fraud and manipulation.
Finally, with big names like Fidelity and BlackRock’s involvement and application for a spot Ethereum ETF, there is a glimmer of hope. Especially since there is constant speculation that Ethereum ETFs will be approved in May 2024.