Regulators Approve New Type of Bitcoin Fund in Boon for Crypto Industry

Regulators Approve New Type of Bitcoin Fund in Boon for Crypto Industry

Federal regulators on Wednesday approved a new financial product that tracks the price of bitcoin, a historic moment for the cryptocurrency industry that supporters hope will increase investment in the technology.

Securities and Exchange Commission 11 applications authorized Exchange-traded funds linked to Bitcoin are being offered by financial firms as a potentially easier way for people to invest in the digital asset on traditional platforms like the Nasdaq. Some of the world’s biggest financial companies, including asset managers BlackRock and Fidelity, were given approval to offer products known as ETFs, which can begin trading on Thursday.

The approval was welcomed as a sign that mainstream financial institutions are willing to use digital currencies even after 18 months of market decline and high-profile bankruptcies. Since the fall, the price of Bitcoin has surged more than 60 percent as traders believe the SEC’s support of new crypto products will give the industry a wave of regulatory legitimacy, leading to interest from professional money managers and amateur traders. New investment will be received.

The price of Bitcoin rose on Tuesday after a post announcing the approval of an ETF appeared on the SEC’s official

The industry only had to wait until Wednesday, when the SEC authorized the products in a regulatory filing. The long-awaited announcement brings a pillar of the mainstream finance system into the experimental world of crypto.

Widely offered by financial firms such as Charles Schwab and Vanguard, ETFs are baskets of assets divided into shares that can be bought and sold on the open market – a form of investing popular among wealth managers with trillions of dollars in capital. Let’s control.

Instead of storing Bitcoin in an online wallet, investors in a Bitcoin ETF will own shares in a fund containing the digital currency. Investors will receive exposure to the crypto market without some of the risks and inconveniences historically associated with the technology.

“It creates a bridge to the traditional financial market,” said James Seifert, a Bloomberg analyst who tracks the ETF. “Long term, I think the money is going to come.”

Crypto proponents had pushed for the introduction of a Bitcoin ETF for years, hoping it would accelerate more widespread adoption of the cryptocurrency. In 2021, the SEC approved funds that track the future price of Bitcoin without holding the currency. But the agency cited market manipulation in the crypto industry among other issues, arguing that a fund that included Bitcoin would pose greater risks to consumers.

Those arguments failed in court. In August, the SEC lost a legal battle with crypto asset manager Grayscale Investments, which was one of the companies applying to offer the product, clearing the way for a Bitcoin ETF.

The price of Bitcoin soon skyrocketed, reaching nearly $47,000, its highest value since a series of bankruptcies sent the industry into recession in 2022. On social media, speculation ran rampant about the timing of approval by the SEC, with the fake announcement causing a 15-minute uproar on Tuesday. A celebration ensued before Mr. Gensler intervened. An official X account for the platform’s security resources Said The agency had not enabled two-factor authentication, a common digital security tool, to protect his account.

Anticipation for new crypto products had been building for months. In November, BlackRock filed paperwork to create an ETF tracking the price of Ether, the second-most valuable cryptocurrency after Bitcoin, generating further excitement.

But skeptics argued that the new products would not solve any fundamental problems in crypto. Several major crypto firms declared bankruptcy in 2022, highlighting the fragility of the digital asset industry. Critics argued that many companies were not providing much practical utility.

In a public letter last week, the nonprofit advocacy group Better Markets Said Approval of a Bitcoin ETF would be a “historic mistake that will certainly harm investors on a large scale.” Other analysts have argued that the product won’t boost crypto prices much.

The rising prominence of companies like BlackRock in the crypto world also flies in the face of the renegade industry’s early promise to provide an alternative to mainstream financial giants.

“There is a lot of irony and hypocrisy,” said John Stark, a former SEC official and longtime critic of crypto.

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