Members of the US Securities and Exchange Commission (SEC) commented on the approval of several spot Bitcoin products on January 10.
One commissioner, Caroline A. Crenshaw, expressed dissent by raising concerns about fraud and market manipulation, as well as broader concerns about Bitcoin. In particular, she disputed the nature of the recent approvals and stated:
“I’m afraid there will be confusion about what exactly these products are (they are not ETFs). [exchange-traded funds] registered under the Investment Company Act of 1940, the ubiquitous products used today by millions saving for retirement) – and that investors can infer protections that in fact do not exist.”
Crenshaw explained in a footnote that the new products are instead exchange-traded products (ETPs) under the Securities Act of 1933.
Other SEC members referred to the products in similar ways. Commissioners Hester Peirce and Mark Uyeda, who both agreed to the approvals, also referred to the products as ETPs in their statements. SEC Chairman Gary Gensler – who, despite his critical stance, notably voted in favor of the latest approvals – also called the approvals ETPs in his own statement.
Unlike Crenshaw, none of those other SEC members elaborated on the difference between the two types of investment vehicles.
SEC Approval Order Mentions ETFs
Elsewhere, the SEC order granting approval to the relevant products names several offerings with “ETF” in the name, including those from Bitwise, Hashdex, Ark Invest, Invesco Galaxy and Franklin Templeton. However, the decision generally describes the products as spot Bitcoin ETPs throughout the text.
The two terms are not always exclusive. The Financial Industry Regulatory Authority (Finra), a company that serves as an independent regulator for U.S. securities firms, states that ETFs are considered a specific type of ETP, noting that “there is no single definition of an exchange-traded product.”
It remains to be seen whether the implications for investor safety extend to the asset managers behind each product. In concrete terms, it is unclear whether these companies must make the distinction clear in their public communications.
Notably, Grayscale called its offering an ETF in a recent press release. Coinbase, which is involved in several offerings involving control and monitoring sharing, also referred to the latest round of approvals as ETFs in a blog post.