SEC Announces Full Text Release of Recognizing Bitcoin Spot ETFs

On January 11, according to Reuters, the U.S. Securities and Exchange Commission (SEC) documents showed that the SEC has approved VanEck, Bitwise, Fidelity, Franklin, Valkyrie, Hashdex, Ark Invest, Grayscale, BlackRock, WisdomTree and Invesco Galaxy. 11 spot Bitcoin ETFs.

U.S. Securities and Exchange Commission (SEC) Chairman Gensler issued a statement on the SEC website announcing the approval of a Bitcoin spot ETF. The main reason for this decision was a ruling by the District of Columbia Federal Court of Appeals, which held that the SEC failed to adequately explain its decision not to approve the Grayscale ETF. This ruling played a great role in promoting the approval of Bitcoin ETF.

He emphasized: Although we have approved the listing and trading of certain spot Bitcoin ETP stocks, we have not endorsed Bitcoin.

Investors should remain cautious about the numerous risks associated with Bitcoin and products whose value is tied to the cryptocurrency.

Full text below:

Today, the Commission approved the listing and trading of multiple spot Bitcoin exchange-traded product (ETP) shares.

I have often emphasized that the Commission acts in accordance with the law and the interpretation of the law by the courts. Chairman Clayton has led the committee since 2018 and will serve as Chairman until March 2023. Over the past few years, the Commission has rejected exchange rule submissions for more than 20 spot Bitcoin ETPs. One of the rejected rule submissions came from Grayscale, who planned to convert the Grayscale Bitcoin Trust into an ETP. This decision reflects the Commission's concern for market stability and investor protection. The Committee will continue to review and make appropriate decisions to ensure fairness, transparency and stability in the market.

We are currently facing a series of submissions similar to those we have disapproved in the past. However, things have changed. The Federal Court of Appeals for the District of Columbia ruled that the Commission’s reasons for not approving the listing and trading of the ETP proposed by Grayscale were insufficiently explained (Grayscale decision). Accordingly, the court reversed the Grayscale decision and returned the issue to the Commission. Based on these circumstances and those discussed in more detail in the Approval Order, I believe the most feasible path forward is to approve the listing and trading of these spot Bitcoin ETP shares.

The Committee evaluates compliance with the Stock Exchange Act and related regulations in accordance with the rules of the national stock exchange to protect investors and the public interest. The Committee is neutral and does not hold views on specific companies, investments or the underlying assets of ETPs. Issuers of securities and the exchanges on which they are listed, subject to the Securities Act, the Stock Exchange Act and the Commission's regulations, have the same rights to access our regulated markets as others.

Importantly, today’s Commission action is limited to ETPs holding Bitcoin, a non-security commodity, and in no way means that the Commission is willing to approve listing standards for crypto-asset securities. This approval also does not represent any view by the Commission regarding the status of other crypto-assets under the federal securities laws or the current non-compliant status of certain crypto-asset market participants. As I have said in the past, I am not prejudging any one crypto-asset, and the vast majority of crypto-assets are investment contracts and, therefore, subject to federal securities laws.

Today’s investors can already buy, sell, or otherwise buy, sell, or otherwise trade at numerous brokerage firms, mutual funds, national stock exchanges, peer-to-peer payment apps, non-compliant cryptocurrency trading platforms, and the Grayscale Bitcoin Trust. Ways to get Bitcoin investment opportunities. Today’s action will provide certain investor protections:

First, sponsors of Bitcoin ETPs will be required to provide full, fair and truthful disclosures about the product. Investors holding any Bitcoin ETP listed and traded will benefit from a public registration statement and required periodic reporting. While these disclosures are required, it is important to note that today's action does not constitute an endorsement of the disclosed ETP arrangements, such as custodial arrangements.

Secondly, these products will be listed and traded on registered national stock exchanges. Such regulated exchanges must have rules designed to prevent fraud and manipulation, and we will monitor them closely to ensure they enforce these rules. In addition, the Commission will comprehensively investigate any fraud or manipulation in the securities markets, including manipulative schemes utilizing social media platforms. Such regulated exchanges also have rules designed to address certain conflicts of interest and protect the interests of investors and the public.

Additionally, existing rules and codes of conduct will apply to the purchase and sale of approved ETPs. For example, when a securities broker recommends an ETP to a retail investor, the Best Interest Regulation will apply; investment advisers have fiduciary duties under the Investment Advisers Act. Today’s action does not approve or endorse cryptocurrency trading platforms or intermediaries, which are largely inconsistent with federal securities laws and often present conflicts of interest.

Third, Commission staff are simultaneously completing a review of 10 spot Bitcoin ETP registration statements, which will help create a level playing field for issuers and benefit investors and the broader market. .

The agency has experience in regulating non-securities commodity ETPs such as certain precious metals since 2004. This experience will be very valuable in our oversight of spot Bitcoin ETP trading.

Although we are neutral, I would like to point out that the underlying assets of precious metals ETPs have consumer and industrial uses, while Bitcoin, in comparison, is primarily a speculative, highly volatile asset. Also used for illegal activities, including ransomware, money laundering, sanctions evasion, and terrorist financing.

Although we approved the listing and trading of certain spot Bitcoin ETP shares today, we do not approve or endorse Bitcoin. Investors should remain cautious about the many risks associated with Bitcoin and its value relative to the cryptocurrency.

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