Exchange-traded funds (ETFs) that track bitcoin prices were approved by the SEC on Wednesday, a game-changer for the cryptocurrency industry after more than a decade of trying to establish them.
Since 2013, the SEC has rejected multiple asset managers' bitcoin ETF applications due to market manipulation concerns. A court ruled in August that the SEC was improper to reject Grayscale Investments' bitcoin ETF proposal, compelling the agency to reconsider.
The SEC authorized applications from ARK Investments, BlackRock (BLK.N), and Fidelity on Wednesday. How the items work and why approval matters:
They will be on Nasdaq, NYSE, and CBOE. Their assets will be physical bitcoin purchased from crypto exchanges.
Products follow bitcoin benchmarks. Some follow an index created by Kraken subsidiary CF Benchmarks, which aggregates trade data from numerous Bitcoin-USD markets managed by prominent cryptocurrency exchanges.
Nasdaq and CBOE devised a market surveillance mechanism with Coinbase, the largest U.S. bitcoin exchange, to address SEC manipulation concerns. Issuers expect to charge 0.20% to 0.8%, substantially below the ETF market average.
Yes. A spot bitcoin ETF lets investors speculate on bitcoin prices without the hazards of direct ownership. Some crypto exchanges and wallets have weak cyber security and are prone to hacks.
The industry has also seen bankruptcies and controversies, like FTX's collapse after founder Sam Bankman-Fried was convicted of fraud.
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