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The US Securities and Exchange Commission has approved the first spot bitcoin exchange traded funds in a watershed moment that cryptocurrency enthusiasts are betting will draw new retail and institutional investors into the market.
The top American securities regulator granted permission on Wednesday to sponsors of 10 ETFs, ranging from established players such as Fidelity and Invesco to digitally focused newcomers including Grayscale and Ark Invest.
The first funds — which hold assets such as mutual funds, but trade on exchanges like stocks and enjoy special tax treatment in the US — are expected to start trading as soon as Thursday morning, when BlackRock will ring the opening bell at Nasdaq to promote its iShares Bitcoin Trust.
The approval comes after months of anticipation and a bitter legal battle. It also caps a wild 24 hours that saw hackers briefly
“We want to make sure that we provide access and make it as accessible as possible,” Wood told the FT. “We are not looking to maximise profits on this. We’ve got other actively managed products that will help us.”
In a departure from normal ETF practice, the funds will use cash to create and redeem new shares rather than in-kind transactions involving their underlying assets — bitcoin, in this case.
The SEC held out against a spot bitcoin ETF for nearly a decade, but in late 2021 it allowed ProShares to launch the first of several ETFs that hold bitcoin futures.
After Grayscale filed its lawsuit, well-known ETF providers began filing their own applications and the SEC started working with them to fine tune their proposals. In recent months, the issuers have spelt out how they will protect investors from market manipulation, identified some of the financial institutions that will create and redeem shares and shifted to the cash-based method of creation.
The SEC has been “one of the most sceptical regulators in the world and has gotten to the finish line and approved it”, Wood said. “And you know there’s been a lot of battle testing going on around this.”