The US Securities and Exchange Commission (SEC) has given the green light to the first exchange-traded funds (ETFs) that track the price of bitcoin, a landmark decision that could boost the mainstream adoption of the cryptocurrency. However, the SEC also issued a strong warning to investors about the risks and volatility of bitcoin and other crypto assets, saying that it did not approve or endorse bitcoin itself.
The approval of the bitcoin ETFs, which will allow investors to buy and sell shares of funds that hold bitcoin without having to deal with the complexities of owning and storing the digital currency, comes after years of resistance and skepticism from the SEC. The agency had rejected several previous proposals for bitcoin ETFs, citing concerns about fraud, manipulation, and lack of regulation in the crypto market.
The SEC’s chairman, Gary Gensler, said that the agency was still cautious about crypto assets, which he described as “speculative, volatile” and often used for “illicit activity”. He urged investors to be careful and do their research before investing in bitcoin or products linked to it.
The approval of the bitcoin ETFs was welcomed by many crypto enthusiasts and experts, who saw it as a sign of growing recognition and legitimacy for the cryptocurrency, which was created in 2009 as an alternative to traditional money. Bitcoin, which has a limited supply of 21 million coins, is seen by some as a hedge against inflation and a store of value, while others view it as a speculative asset or a medium of exchange.
The bitcoin ETFs are expected to attract more institutional and retail investors to the crypto space, as they will offer a simpler and safer way to gain exposure to the price movements of bitcoin, without having to worry about the technical and security issues of buying and storing the cryptocurrency directly. The bitcoin ETFs will also benefit from the liquidity and transparency of the regulated stock market, where they will be traded.
The SEC’s approval of the bitcoin ETFs follows similar moves by other countries, such as Canada, which launched its first bitcoin ETF in February 2021. Analysts at Standard Chartered Bank predicted on Monday that the price of bitcoin could more than double to $100,000 by the end of 2024, following the SEC’s approval. Bitcoin was trading at around $46,500 after the announcement.
