The approved ETFs are expected to attract significant inflows. Estimates suggest that Valkyrie could see $200-400 million, with the overall market experiencing $4-5 billion in inflows within the first few weeks.
In a historic move, the US Securities and Exchange Commission (SEC) has approved 11 spot Bitcoin Exchange-Traded Funds (ETFs) after more than a decade of rejections. The decision marks a remarkable shift in the regulatory space, signaling the growing acceptance of cryptocurrencies within traditional finance.
SEC’s Green Light and the Approved Bitcoin ETFs
As revealed in a filing on Wednesday, the SEC’s approval includes ETFs from well-known entities such as ARK 21Shares (ARKB), Invesco Galaxy (BTCO), VanEck (HODL), WisdomTree (BTCW), Fidelity Investments (FBTC), Valkyrie (BRRR), BlackRock Inc (IBIT), Grayscale Investments ($GBTC), Bitwise (BITB), Hashdex (DEFI) and Franklin Templeton (EZBC). Most issuers have filed for acceleration, aiming to launch the funds simultaneously today.
Cameron and Tyler Winklevoss initiated the quest for a spot Bitcoin ETF in 2013 with their Winklevoss Bitcoin Trust proposal. However, the SEC consistently rejected their proposal, and subsequent applications over the years, citing concerns related to financial stability and market integrity.
The tide turned after a crucial court ruling highlighted deficiencies in the SEC’s rejection of Grayscale’s proposed Exchange-Traded Product (ETP), leading to a reassessment of similar filings.
In a statement following the approval, SEC Chairman Gary Gensler emphasized the Commission’s commitment to acting within the law and following court interpretations. He highlighted the changed circumstances that prompted the reconsideration of spot Bitcoin ETFs, clarifying that the approval is specific to ETP shares holding one non-security commodity – Bitcoin.
Gensler outlined three critical protections for investors. First, ETP sponsors must provide transparent disclosure about the products. Second, the products will be listed and traded on registered national securities exchanges, subject to rules preventing fraud and manipulation. Third, the SEC is concurrently reviewing registration statements for 10 spot Bitcoin ETPs, promoting fairness and competition.
Gensler cautioned investors about the risks associated with Bitcoin, emphasizing its speculative and volatile nature, as well as its use in illicit activities. The approval, he noted, does not endorse Bitcoin itself.
Market Expectations and Seed Funding
The approved ETFs are expected to attract significant inflows. Estimates suggest that Valkyrie could see $200-400 million, with the overall market experiencing $4-5 billion in inflows within the first few weeks. VanEck, Bitwise, and Galaxy have also projected substantial investments, anticipating billions of dollars within the first year.
Before approval, issuers engaged in a fee war to attract investors. Bitwise offered zero fees for the first six months or until $1 billion in assets, while BlackRock discounted fees for the first 12 months or until reaching $5 billion in assets. VanEck has seeded its ETF with $72.5 million, while Bitwise and BlackRock have committed $500,000 and $10 million, respectively.
It is worth noting that this approval follows a year marked by law enforcement actions against crypto firms and industry leaders including the conviction of FTX founder Sam Bankman-Fried and various measures against Binance and its CEO Changpeng ‘CZ’ Zhao, reflecting a broader evolution in the regulatory landscape for digital assets.