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The Securities and Exchange Commission voted Wednesday to allow Wall Street firms to offer easier ways to buy and sell bitcoin on financial markets, a major decision that could lead to the cryptocurrency becoming more mainstream just over a year after the crypto markets crashed.
Banks and investment firms will now be able to sell exchange traded funds, or ETFs, that own bitcoin to regular consumers. Before, investors had to go through cryptocurrency trading firms like Coinbase that charged transaction fees or had to buy financial products that tried to approximate the price of bitcoin in more roundabout ways. Now, retail investors will be able to buy the bitcoin ETFs in the same way they might buy a public company’s stock or a mutual fund.
The move could remove some of the stigma that has clung to bitcoin for years, especially after high-profile cryptocurrency scams and business failures, and make it an even more common part of regular people’s investment and retirement portfolios. The 11 firms that won approval Wednesday to issue the ETFs include traditional asset managers Fidelity and Invesco as well as the crypto-focused Grayscale Investments, among others. They are hoping to capitalize on a global cryptocurrency market that is worth an estimated $1.78 trillion as of Thursday, according to the website Coinmarketcap.
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Crypto enthusiasts hailed the decision. “This is a monumental step for the crypto industry,” Coinbase CEO Brian Armstrong said in an interview with CNBC. Armstrong and other crypto leaders had criticized the SEC for not being more open to bitcoin and other cryptocurrencies.
Bitcoin prices swelled above $48,000, or 5 percent, on Thursday morning, before falling in the afternoon. Ether also surged, jumping more than 7.2 percent to nearly $2,640, as traders bet it would be the next in line for an ETF of its own, and remained up 1.7 percent by midafternoon.
Those moves came on a day when the major indexes, more broadly, were trading slightly lower by midafternoon following the release of new inflation data.
For years, the SEC had rejected similar applications for bitcoin ETFs. But last year, a federal court ruled that the regulator had not sufficiently explained its reasons for rejecting an application to list a bitcoin ETF by Grayscale. Wednesday’s decision came in response to that ruling, SEC Chair Gary Gensler said in a statement.
“Based on these circumstances … I feel the most sustainable path forward is to approve the listing,” Gensler said.
Gensler emphasized that the decision does not reflect a broader endorsement of cryptocurrency by the regulator. Two out of five SEC commissioners, Caroline Crenshaw and Jaime Lizárraga, voted against approval.
“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” Gensler said.
Bitcoin is far and away the most stable and popular cryptocurrency. Even after the crypto crash at the end of 2022, its price remained high relative to other crypto assets. As the first major cryptocurrency, it has had a longer history and investors are more comfortable buying it compared with a seemingly endless number of newer and lesser-known cryptocurrencies.
The industry is still rife with scams, and bitcoin is used constantly by criminals seeking to move money without being blocked by governments. Gensler said crypto trading platforms are mostly noncompliant with federal securities laws, and called bitcoin a “speculative, volatile asset” that supports ransomware, money laundering, sanctions evasion and terrorist financing.
Crenshaw, a longtime SEC staff attorney who was sworn into office as commissioner in 2020, issued a detailed dissenting opinion stating that she is “deeply concerned” about Wednesday’s decision.
“I am concerned that these products will flood the markets and land squarely in the retirement accounts of U.S. households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets and will impact the [bitcoin ETF’s],” Crenshaw said.
She also expressed concern that the decision would set a standard to protect even riskier, more speculative products, making it harder for the SEC to protect investors. “I fear that today we are setting ourselves up for tomorrow’s failure, and it will be the investors that we have a duty to protect who will ultimately pay the price,” Crenshaw wrote.
The day before the SEC’s announcement, its account on X, formerly Twitter, was compromised and sent out an announcement approving the bitcoin ETFs prematurely, leading to a short spike in the cryptocurrency’s price.
The crash of crypto prices in 2022 after they rose massively during the pandemic and the conviction of crypto exchange FTX’s founder Sam Bankman-Fried for fraud have cast a shadow on the industry. Still, bitcoin is owned as an investment by millions of Americans, who see it as just another way to diversify their portfolios.
“This asset class is here to stay,” Armstrong said.
correction
An earlier version of this article incorrectly described the view of Commissioner Caroline Crenshaw as a consenting opinion. It was a dissenting opinion. The article has been corrected.
Source link: https://www.washingtonpost.com/business/2024/01/11/bitcoin-sec-approval-coinbase/