The Securities and Exchange Commission (SEC) has announced its approval of
11 bitcoin spot ETFs, allowing for trading to begin as early as today.
There has been a lot of buzz and build-up to this outcome, not least because the SEC’s X account was
reportedly hacked resulting in their determination being tweeted a day early.
For many, this is the watershed moment that bitcoin has needed to reach the mainstream, but it’s not clear if it is that simple. What is the industry thinking about the latest decision, and what could it mean for the future of bitcoin
and the broader cryptocurrency market.
What is ETF trading?
Exchange-traded funds or ETFs are pooled investments which can be traded or sold on a stock exchange like a normal stock. They are tied to a particular index, sector, or commodity, in this case they may be tracked to the bitcoin price.
Having a bitcoin spot ETF will allow investors to have bitcoin invest in the cryptocurrency without having to go through an exchange like Coinbase or Binance, which has had its share of
run-ins with the regulators.
The SEC approved 11 bitcoin spot ETF products from Blackrock, ARK, WisdomTree, Invesco and Galaxy, Bitwise, VanEck, Franklin Templeton, Fidelity Investments, Valkyrie Funds, Grayscale, and Hashdex.
The decision to allow bitcoin to be traded in ETFs has a long history starting back in 2013, but was likely catalysed when Grayscale
won its lawsuit against the SEC in August 2023 after the regulator had denied an application to turn the Grayscale Bitcoin Trust into an ETF.
How fintechs are viewing the approval
Many of those in the industry are pleased with this decision and think this is the golden ticket for bitcoin to become more common in several ways.
Yoann Lewkowitz, head of legal at Coincover, said this would mark “the beginning of mass adoption. Up until now, the only way to gain exposure to this type of instrument was via a small number of exchanges that for the most part are offshore and lack clear
regulatory supervision. The SEC’s potential approval is a sign of the institutionalisation of the crypto market that will pave the way for mainstream investors to dive in with the same ease as trading the S&P 500.”
For Lewkowitz and others, this decision works twofold to help legitimise bitcoin by making it easier to invest in the currency and getting that seal of institutional approval which may have held investors back in the past.
Echoing this,
Brad Garlinghouse, Ripple CEO, said on X: “Today’s news is further legitimization of crypto as an asset class. I expect this will be yet another catalyst for institutional investment / adoption, ideally leading the industry to focus outside primarily speculative
to broader real-world use cases, underpinning that legitimization.”
Valérie Noël, head of trading, Bank Syz said this result “simplifies the investment process as investors can buy the ETF through traditional investment channels, without needing to deal with the complexities of cryptocurrency exchanges, wallets, and private
keys. The approval could lead to an increase in Bitcoin's price, as it would likely trigger a wave of new investments from investors who were waiting for a more regulated and familiar investment vehicle.”
Some volatility to be expected
However, for Noël the future is not just plane sailing, as she noted this “could also lead to increased volatility in the short term as markets adjust.”
Timo Lehes, co-founder and managing director, Swarm, also saw this potential for some volatility after this announcement: “Bitcoin will likely see significant turbulence, and has much of the news in its price already, we have to think here of the wider implications.”
Lewkowitz also added some hesitation warning: “With DeFi becoming embedded into TradFi, the onus is on regulators to begin moving the needle on putting the right safeguards in place to support this transition and foster greater trust around the crypto market.”
He said that all new financial instruments come with risks: “Volatility is a given, and widespread adoption of a spot-Bitcoin ETF would lead fund managers having to accumulate a large amount of Bitcoin in self-custodial or semi-custodial wallets which could
become prime targets for hacks, attacks and possible human error. This will lead to higher expectations around risk mitigation and security capabilities, meaning security is paramount and must be a top priority for ETF managers.”
Yet, Lehes went on to emphasise that “the approval of such ETFs in the US will be a huge change in attitude from the regulator, and for the market will underpin what it wants to see – well-respected and fully compliant institutions engaging in the trade
of digital assets.”
Another point here is that the SEC's decision to approve ETFs may bring some pressure on other regulators throughout the globe.
Gracy Chen, managing director, Bitget, said to this point: “We anticipate rapid adoption of regulated Bitcoin ETFs across Asia especially after SEC's Bitcoin ETF approval."
Shivam Thakral, CEO, BuyUcoin, said the same for the Indian market: “We are optimistic that other major crypto markets like India will soon follow the trend and create a more regulated environment for digital asset-based financial products.”
Overall, bitcoin spot ETFs are being viewed in a positive light by those in the industry. However, it’s important to remember that they are also often the same groups pushing for this.