Bitcoin: US regulator approves ETFs in historic moment for cryptocurrency

Issuers were offering steep discounts before US regulator's announcement

The US Securities and Exchange Commission has approved spot-trading of Bitcoin ETFs. Reuters
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The US Securities and Exchange Commission announced on Wednesday its approval of the country's first spot-trading of Bitcoin exchange-traded funds (ETFs).

The regulator approved 11 ETFs, including Grayscale, Bitwise and Hashdex, according to a notice on its website.

It also approved ETFs from BlackRock, Fidelity, ARK Invest, Invesco and others.

Trading in the Bitcoin ETFs could begin as soon as Thursday morning, allowing everyday investors to financially benefit from the Bitcoin cryptocurrency without directly holding it.

"We did not approve or endorse Bitcoin," SEC chairman Gary Gensler said in a statement.

"Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto."

The approval is a dramatic shift for the SEC, which for years has rejected applications due to fears over market manipulation.

Those fears were reignited on Tuesday night when the SEC said its X account was compromised after a post saying that it had approved Bitcoin ETFs.

The unauthorised post was later taken down, but not before the price of Bitcoin rose by more than 2.5 per cent.

Bitcoin was valued at $44,877.50 as of Wednesday morning ET.

The SEC will have to investigate itself for market manipulation after the hacked post, Fox Business reported.

The US regulator's approval of Bitcoin ETFs would allow people to buy the cryptocurrency without using a crypto exchange or broker, making it easier for traders to invest in the digital token.

Mr Gensler has made repeated warnings on the risks of investing in cryptocurrency, which he has likened to “the Wild West”.

“Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams," he said.

Mr Gensler said that these investments continue to be replete with fraud or bogus coin offerings, Ponzi and pyramid schemes, and "outright theft", where a project promoter disappears with investors’ money.

He also warned that investing in cryptocurrency “can be exceptionally risky”, noting platforms that have lost value.

US President Joe Biden's administration launched a crypto framework in 2022 for the SEC and Commodities Futures Trading Commission to investigate and enforce action against unlawful deeds in the digital assets market.

Since then, the SEC has targeted major crypto exchange platforms, Coinbase and Binance.

In separate filings, the US regulator accused the two of operating unregistered exchanges, among other claims.

Binance founder Changpeng Zhao in November pleaded guilty to failing to implement an effective anti-money laundering programme.

The Justice Department said Binance also agreed to pay $4.3 billion in penalties.

Updated: January 11, 2024, 5:09 AM