Yesterday evening, January 10, the US Securities and Exchange Commission (SEC) approved exchange-traded funds (ETFs) that track the price of Bitcoin. They tried to launch such a product since 2013, so it is not surprising that the event is called revolutionary in the cryptosphere.
An ETF (exchange traded fund) is an investment fund that forms a portfolio of assets—in the context of this news, this will be a certain number of bitcoins—and then issues its own shares tied to these same assets. By purchasing Bitcoin ETF securities, the investor does not own the cryptocurrency directly, but the price of the shares will directly depend on the value of Bitcoin. Note that the SEC has approved spot ETFs, meaning they hold Bitcoin itself, as opposed to the long-approved Bitcoin futures ETFs, which hold contracts tied to the cryptocurrency.
The US Securities and Exchange Commission on Wednesday accepted applications from 11 funds as valid. Their Bitcoin-linked shares will be traded on the New York Stock Exchange (three funds), the Nasdaq Exchange (two funds), and the Chicago Board Options Exchange (CBOE). Exchanges are allowed to begin trading securities as early as Thursday. Issuer fees will range from 0.2% to 1.5%, and a number of funds will offer zero-fee shares for a limited time.
In late 2021, the SEC for the first time allowed the launch of an ETF investing in Bitcoin futures, but did not allow spot funds, citing the inability to adequately oversee Bitcoin markets to prevent fraud and manipulation.