Gary Gensler's Take on Bitcoin ETF Approvals: An Overview

• SEC Chair, Gary Gensler's Statement on Bitcoin ETFs Approval
• Approval of Spot Bitcoin Exchange-Traded Product (ETP) Shares
• Changed Circumstances and New Filings
• SEC's Evaluation Criteria and Stance
• SEC's Stand on Crypto Assets
• Protections for Investors
• Comparing Bitcoin ETPs to Other Assets
• Remaining Cautious About Bitcoin and Crypto-Related Products

SEC Chair, Gary Gensler's Statement on Bitcoin ETFs Approval

Approval of Spot Bitcoin Exchange-Traded Product (ETP) Shares

On January 10, 2024, the U.S. Securities and Exchange Commission (SEC) granted approval for the listing and trading of several spot bitcoin exchange-traded product (ETP) shares. The Commission's decision-making process has always been guided by existing laws and their interpretation by the court. Since 2018, under former Chair Jay Clayton and until March 2023, the SEC disapproved over 20 exchange rule filings for spot bitcoin ETPs, including a filing by Grayscale, which sought to convert the Grayscale Bitcoin$42,260 -0.64% Trust into an ETP.

Changed Circumstances and New Filings

The SEC is currently reviewing similar filings to those previously disapproved. However, the situation has changed. The U.S. Court of Appeals for the District of Columbia ruled that the SEC failed to provide an adequate explanation for disapproving the listing and trading of Grayscale's proposed ETP, referred to as the Grayscale Order. Consequently, the court vacated the Grayscale Order and returned the matter to the SEC. Based on these circumstances, the chair, Gary Gensler, believes the best course of action is to approve the listing and trading of these spot bitcoin ETP shares.

SEC's Evaluation Criteria and Stance

Any rule filing by a national securities exchange is evaluated by the SEC based on its accordance with the Exchange Act and the applicable regulations, including its design to protect investors and public interest. The SEC does not favour or oppose specific companies, investments, or the assets underlying an ETP. If the issuer of a security and the listing exchange comply with the Securities Act, the Exchange Act, and the SEC's rules, they must be given equal access to regulated markets.

SEC's Stand on Crypto Assets

It's important to note that today's action by the SEC is limited to ETPs holding Bitcoin. This decision does not imply the SEC's willingness to approve listing standards for other crypto asset securities. It does not indicate the SEC's opinion on the status of other crypto assets under federal securities laws or current non-compliance of certain crypto asset market participants.

Protections for Investors

Today's action includes certain safeguards for investors. Firstly, sponsors of Bitcoin ETPs will be mandated to provide complete, fair, and truthful disclosure about the products. Secondly, these products will be listed and traded on registered national securities exchanges, abiding by rules designed to prevent fraud and manipulation. Lastly, the Commission is reviewing registration statements for 10 spot bitcoin ETPs simultaneously, to ensure fair competition and a level playing field for issuers.

Comparing Bitcoin ETPs to Other Assets

Since 2004, the SEC has been monitoring spot non-security commodity ETPs, such as those holding certain precious metals. This experience will be instrumental in overseeing spot bitcoin ETP trading. However, it is noteworthy that Bitcoin is primarily a volatile speculative asset and is also used for illicit activities, unlike the underlying assets in metal ETPs.

Remaining Cautious About Bitcoin and Crypto-Related Products

Although the SEC approved the listing and trading of certain spot bitcoin ETP shares, it did not endorse Bitcoin. Hence, investors are advised to employ caution due to the numerous risks associated with Bitcoin and products with values linked to cryptocurrencies.

Edited by Jonathan Stoker