The Securities and Exchange Commission on Wednesday granted approval to spot bitcoin exchange-traded funds, or ETFs, backed by Wall Street, a key regulatory step expected to drive significant investment in the digital currency.
The agency gave the green light to multiple financial firms to offer spot bitcoin ETFs, including asset management giants like BlackRock, Fidelity Investments and Franklin Templeton that cater to retail investors. Until now, only bitcoin futures ETFs had SEC approval. Bitcoin prices have shot up on the SEC's approval of the ETFs, more than doubling since last year, CoinDesk's Bitcoin Price Index shows. Prices for the cryptocurrency had already risen 61% since October on expectations that the SEC planned to grant approval of spot ETF applications, CoinDesk reported.
A spot bitcoin ETF allows investors to gain direct exposure to bitcoin without holding it. Unlike regular bitcoin ETFs, in which bitcoin futures contracts are the underlying asset, bitcoins are the underlying asset of a spot bitcoin ETF. Each spot bitcoin ETF is managed by a firm that issues shares of its own bitcoin holdings purchased through other holders or through an authorized cryptocurrency exchange. The shares are listed on a traditional stock exchange.
- WisdomTree (WT) announces that the WisdomTree Bitcoin Fund (BTCW) was declared effective by the U.S. SEC; The WisdomTree Bitcoin Fund (BTCW) will be listed on the Cboe BZX Exchange with an expense ratio of 0.30%, although for a six-month period commencing January 11, 2024
- BlackRock's (BLK) spot bitcoin ETF, the iShares Bitcoin Trust (IBIT), has been declared effective by the SEC; seeks to track the price of bitcoin and is expected to begin trading on Nasdaq on January 11, 2024
Spot bitcoin ETFs vs. buying bitcoin: What's the difference?
Investing in spot bitcoin ETFs differs from buying bitcoin directly in a few ways.
First, investors who put money into bitcoin ETFs do not own any bitcoin outright, Cory Klippsten, CEO of Swan Bitcoin, told CBS MoneyWatch. Second, financial firms will charge fees for trading and managing a bitcoin ETF. By contrast, people who buy bitcoin directly pay a transaction fee, but there are no costs for managing the investment.
There are some advantages to owning bitcoin through an ETF. For example, investors can hold and track their bitcoin ETF in the same brokerage account as their other investments.
What could be the impact of the SEC approving bitcoin ETFs?
Investors are betting that the emergence of spot bitcoin ETFs will pump billions of dollars into the digital currency by making it easier and less intimidating to invest.
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