SEC Chairman Approves Bitcoin ETF Statement

Chairman Gary Gensler
January 10, 2024

Today, the Commission approved the listing and trading of Bitcoin ETP (Exchange-Traded Product).

I have often said that the Commission acts within the law and based on how the courts interpret the law. From 2018 under Chairman Jay Clayton until March 2023, the Commission rejected more than 20 Bitcoin ETP applications. One such application, by Grayscale Inc., planned to convert the Grayscale Bitcoin Trust into an ETP.

We are currently facing new and multiple applications similar to those we have rejected in the past. But things have changed. The U.S. Circuit Court of Appeals held that the Commission did not adequately explain its reasons for rejecting the listing and trading of Grayscale’s ETP. Therefore, the court reversed the Commission’s order against Grayscale and remanded the matter to the Commission. Given this situation and the circumstances discussed in detail in the Approval Order, I feel that approving the listing and trading of Bitcoin Spot ETPs is the most sustainable path forward.

The Commission will evaluate applications by stock exchanges based on whether they are consistent with the Exchange Act and the regulations thereunder, including whether it protects investors and the public interest. . The Committee is neutral and does not take a position on specific companies, investments or assets underlying ETPs. If the issuer of a security and the exchange on which it is listed complies with the Securities Act, the Exchange Act, and the Commission’s rules, the issuer will be provided the same access to the markets we regulate as any other issuer. There must be.

Importantly, the Commission’s action today is limited to ETPs that hold a non-securities product called Bitcoin. This does not indicate that the Commission intends to approve listing standards for crypto-asset securities. Nor does the approval represent the Commission’s opinion regarding the status of other cryptoassets under federal securities laws or the current non-compliance of certain cryptoassets market participants with federal securities laws. As we have said in the past, we have no preconceptions about any particular crypto asset, and the vast majority of crypto assets are investment contracts and therefore subject to federal securities laws.

Currently, investors are already able to buy, sell, and gain exposure to Bitcoin through a number of brokerages, mutual funds, stock exchanges, peer-to-peer payment apps, non-regulated crypto trading platforms, and of course the Grayscale Bitcoin Trust. can be obtained. Today’s measures include certain protections for investors.

First, sponsors of Bitcoin ETPs are required to provide full, fair, and truthful disclosures about their products. Investors in publicly traded Bitcoin ETPs will benefit from the disclosures contained in public registration statements and required periodic filings. It is important to note that while these disclosures are mandatory, today’s actions do not encourage disclosed ETP arrangements, such as custody arrangements.

Second, these products are listed and traded on regulated national stock exchanges. Such regulated exchanges are required to have rules to prevent fraud and market manipulation, and the Commission will closely monitor whether exchanges are enforcing these rules. Additionally, the Commission will thoroughly investigate fraud and market manipulation in securities markets, including schemes that utilize social media platforms. Such regulated exchanges not only protect investors and the public interest, but also have rules in place to address certain conflicts of interest.

Furthermore, existing rules and standards of conduct apply to the purchase and sale of approved ETPs. These include, for example, best interest regulations for broker-dealers when recommending ETPs to individual investors, and fiduciary duties for investment advisors under the Investment Advisers Act. Today’s action does not constitute an endorsement or recommendation of any crypto trading platform or intermediary. These are most often not compliant with federal securities laws and often have conflicts of interest.

Third, the Commission’s staff has separately completed the review of 10 Bitcoin physical ETP applications at the same time. Completion of the review levels the playing field for issuers, promotes fairness and competition, and benefits investors and the broader market.

Since 2004, the agency has experience supervising non-securities physical commodity ETPs, including those holding certain precious metals. That experience will be valuable in overseeing Bitcoin spot ETP trading.

Although we are neutral, the underlying assets of metal ETPs have consumer and industrial applications, whereas Bitcoin is primarily a speculative and highly volatile asset, with potential risks associated with ransomware, money laundering, sanctions evasion, etc. Please note that it is also used for illegal activities such as terrorist financing.

Today, we authorized the listing and trading of certain Bitcoin spot ETPs, but we do not endorse or recommend Bitcoin itself. Investors should continue to be aware of the various risks associated with Bitcoin and products whose value is tied to crypto assets.

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