SEC Approves Spot Bitcoin Exchange-Traded Products

On January 10, the SEC granted approval to spot bitcoin exchange-traded products (ETPs), a little over 10 years after the first application with the SEC to create a spot bitcoin product. Interestingly, the approval occurred one day after the SEC’s X account was hacked with an unauthorized announcement of their approval.

Prior to this, the SEC had approved bitcoin futures ETFs, but only spot bitcoin ETPs allow investors to gain exposure to bitcoin without holding it. Spot bitcoin ETPs are novel in that bitcoin itself is the underlying asset, unlike bitcoin futures ETFs, in which the underlying asset is a bitcoin futures contract. Spot bitcoin ETPs are also unique in that they operate as trusts that only hold bitcoin and a small percentage of cash, and rely on cash redemptions rather than in-kind transactions for primary market transactions.  Unlike bitcoin futures ETFs, which are 1940-Act registered funds, spot bitcoin ETPs are registered in accordance with the Securities Exchange Act of 1933.

Eleven firms had their ETP applications approved, including Fidelity and Invesco, as well as crypto managers Grayscale Investments, Valkyrie Funds, and Hashdex, which will enable them to manage their spot bitcoin ETPs and also issue shares of their own bitcoin holdings.  The new U.S. listed bitcoin exchange-traded products had a combined trading volume of $4.6 billion on their first day of trading.

Click here to read SEC Chair Gensler’s statement regarding the SEC’s approval of spot bitcoin exchange-traded products.
Click here to read Chair Gensler’s statement on the SEC’s X (formerly known as Twitter) account hack.