This is a major step for the adoption of cryptocurrencies that could shake up the sector. The American financial markets watchdog, the SEC, gave the green light on Wednesday to the listing of a new bitcoin investment product. The product authorized on Wednesday is an ETF (Exchange traded fund), an index fund that allows investors to benefit from developments in bitcoin without directly placing their money in the digital currency.
Concretely, they buy shares of the fund, which they can resell at any time, and not bitcoin, the value of their assets remaining expressed in dollars. The fund’s assets are placed in cryptocurrencies.
Launched in the early 1990s, ETFs took off in the early 2000s, attracting with their simplicity, which offers the possibility of tracking the performance of gold, oil, a stock index or an industrial sector. According to a report from the firm Oliver Wyman, some $6.7 trillion was housed in ETFs at the end of 2022.
Bitcoin up 70% over three months
On Wednesday, the SEC gave authorization to 11 different companies to launch their own products, including major Wall Street houses like Fidelity and BlackRock, according to the document published on the regulator’s website.
The news caused bitcoin to rise but in measured proportions. In the middle of the night, the cryptocurrency rose 2% to $46,600, and it has already climbed 70% over three months, a rebound that follows the huge plunge of 2022, when the price of bitcoin was divided by four , from 65,000 to 16,000 dollars.
The market had already reached a milestone, in October 2021, with the listing of the first ETF invested not directly in bitcoins but in futures contracts linked to the cryptocurrency.
Until now, access to digital currencies required opening an account on a cryptocurrency exchange platform and converting a traditional currency (issued by a central bank), such as the dollar.
“A turning point”
The stock market policeman had already rejected, on numerous occasions, marketing requests for similar products in the past, but a recent development has changed the situation.
At the end of October, a federal appeals court in Washington confirmed that the SEC was not justified in refusing the approval of its bitcoin ETF to asset manager Grayscale. Given this case law, “I believe the most tenable decision is to approve the listing” of these ETFs, SEC Chairman Gary Gensler said in a statement.
The arrival of an ETF is “a turning point for digital assets and signals a move towards mainstream adoption and (their) legitimacy,” commented Thomas Tang, vice president at private equity firm Ryze Labs. “By their mere existence within a regulated framework, bitcoin ETFs will give institutional credibility to digital assets,” he added.