The SEC Approves ETFs That Track Bitcoin

The US Securities and Exchange Commission (SEC) recently approved the applications of 11 asset and investment management firms to launch exchange-traded funds (ETFs) that track bitcoin on the spot market. This event heralds significant integration of the evolving cryptocurrency sector into the traditional financial system. The approval of the spot bitcoin ETFs makes it easier for ordinary investors to invest almost directly in bitcoin. From now on, investors can invest in assets that track the price of bitcoin without having to navigate the complexities of cryptocurrency exchanges or digital wallets.

The Romantic Saga between the SEC and Bitcoin

In the past, the SEC rejected similar applications to list bitcoin-tracking ETFs, citing concerns about market manipulation, volatility and the need to protect investors. The latest approval follows Grayscale Investments’ appeal against the SEC’s June 2022 ruling, which rejected Grayscale’s application to convert its bitcoin fund into an ETF. The US Court of Appeals accepted Grayscale’s appeal, thus paving the way for the SEC’s approval of 10 other bitcoin ETFs.

Players in the crypto industry view this approval as a major shift in the regulatory stance toward cryptocurrencies, potentially opening the door for future approvals of ETFs that track other cryptocurrencies, especially Ethereum.

Premature Celebration?

Despite the crypto industry’s elation, it is important to note that SEC Chairman Gary Gensler emphasized that this is a specific approval not indicate broader support for cryptographic assets. Gensler highlighted the speculative and volatile nature of crypto assets, their frequent use in scams, and urged investors to exercise caution. Gensler also stated that the SEC will ensure full disclosure and regulatory compliance by ETF issuers, and that the products will be traded on licensed securities exchanges.

What about in Israel?

When it comes to bitcoin ETFs, the situation in Israel is very different from that in the United States. In Israel, there were two attempts to launch bitcoin-backed debentures and list them for trading on TASE UP, both of which were unsuccessful. Furthermore, in those two attempts, the bitcoin-linked debentures were intended in advance solely for institutional or classified investors, and not for the general public, i.e., not for “ordinary” investors.

There are huge differences between what is happening in the United States and in Israel. While the US regulatory authority has found a way to integrate crypto into the traditional capital market system and make it accessible to the general public while managing risks, the Israeli regulatory authority remains cautions, worrying about the future instead of taking part in it. Time will tell if Israel can become a significant player in the global crypto industry, or if it will lag behind.

***

Adv. Andrey Yanai, a partner in Barnea Jaffa Lande’s Capital Markets Department, and Adv. Avihai Tal, an associate in the department, are at your service to answer any questions pertaining to digital assets, blockchain, and more.