Crypto gets big boost as U.S. SEC approves Bitcoin ETFs

The U.S. Securities and Exchange Commission has approved the listing and trading of a number of spot Bitcoin exchange-traded product (ETP) shares, a landmark in the history of the cryptocurrency.

The regulator approved applications from BlackRock, Fidelity, and Invesco among others. Some products are expected to begin trading from today.

The Commission's action is cabined to exchange-traded product holding one non-security commodity, bitcoin, says SEC chair Gary Gensler.

"It should in no way signal the Commission's willingness to approve listing standards for crypto asset securities. Nor does the approval signal anything about the Commission's views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws. As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws," Gensler says in a statement.

"Investors today can already buy and sell or otherwise gain exposure to Bitcoin at a number of brokerage houses, through mutual funds, on national securities exchanges, through peer-to-peer payment apps, on non-compliant crypto trading platforms, and, of course, through the Grayscale Bitcoin Trust," he says.

The SEC's action will include certain protections for investors, according to Gensler.

"First, sponsors of bitcoin ETPs will be required to provide full, fair, and truthful disclosure about the products. Investors in any bitcoin ETP that is listed and traded will benefit from the disclosure included in public registration statements and required periodic filings," he says.

"Second, these products will be listed and traded on registered national securities exchanges. Such regulated exchanges are required to have rules designed to prevent fraud and manipulation, and we will monitor them closely to ensure that they are enforcing those rules," he explains.

The SEC's action does not approve or endorse crypto trading platforms or intermediaries, which, for the most part, are non-compliant with the federal securities laws and often have conflicts of interest.

"Third, Commission staff is separately completing the review of registration statements for 10 spot bitcoin ETPs simultaneously, which will help create a level playing field for issuers and promote fairness and competition, benefiting investors and the broader market," says Gensler.

Commenting on the development, Viram Shah of CEO Vested Finance, says for Indian investors, the Bitcoin ETF will provide an opportunity to include crypto in their portfolio via the LRS route.

"An Indian investor taking exposure on Bitcoin ETF will get easy exposure through regulated entities without worrying about the storage of the cryptocurrency. Besides, 1% TDS on transactions will not be applicable since there is no actual crypto being purchased and capital gains tax will also be lower. On other hand, the 20% TCS introduced in 2023 will be applicable on deposits above INR 7 Lakhs via LRS. Although, unlike TDS, it can be used to offset other tax liabilities but may lead to liquidity getting stuck," says Shah.

"In addition, management fees for the ETF is an additional cost. BlackRock plans to charge 0.3%, while ARK has announced a fee of 0.25% which seem like reasonable given the average ETF management fee in the US is about 0.5%, Shah adds.

According to ZebPay CEO Rahul Pagidipati the approval of Spot Bitcoin ETFs not only symbolises a maturing market but also signifies support from regulatory authorities. "The crypto industry has experienced a remarkable journey, marked by resilience and growth, and SEC's approval for Spot Bitcoin ETFs further adds optimism. The readiness of the sector to list these ETFs and the commitment of the broader market to continue the growth momentum, highlight the industry's confidence in regulatory decisions," Pagidipati says.

In a statement dissenting the approval of Bitcoin exchange-traded products, SEC commissioner Caroline A Crenshaw says the Commission’s actions are “unsound and ahistorical”. "And worse, they put us on a wayward path that could further sacrifice investor protection. I cannot agree that these actions serve either our statutory or foundational investor protection mandates and, as such," Crenshaw says in her statement.