In a historic move, the U.S. Securities and Exchange Commission (SEC) has granted approval for exchange-traded funds (ETFs) that track the price of bitcoin, marking a significant milestone for the cryptocurrency industry’s decade-long pursuit of such a product. The SEC’s previous rejections, citing concerns about vulnerability to market manipulation, were challenged in August when a court ruled against the agency’s decision on Grayscale Investments’ bitcoin ETF application. On Wednesday, the SEC granted applications from major players such as ARK Investments, BlackRock, and Fidelity, signaling a paradigm shift for the industry.
These approved ETFs are set to be listed on Nasdaq, NYSE, and the CBOE, with their assets comprising physical bitcoin purchased from crypto exchanges and safeguarded by custodians like Coinbase Global. To mitigate manipulation concerns, Nasdaq and CBOE have implemented a market surveillance mechanism in collaboration with Coinbase. The ETFs will track a bitcoin benchmark, with some utilizing an index provided by CF Benchmarks, a subsidiary of Kraken crypto exchange. The approval is seen as a groundbreaking development, offering investors an alternative to directly owning bitcoin by providing exposure to its price fluctuations without the associated complexities and risks, such as setting up crypto wallets and dealing with potential security vulnerabilities of crypto exchanges. Issuers are planning to charge fees ranging from 0.20% to 0.8%, significantly below the broader ETF market average.