The SEC capitulated on spot bitcoin ETF
Not only investor protection, but financial stability may be at issue
Taken on 10 January 2024, the SEC decision clears the way for the first U.S. exchange-traded funds (ETF) that hold bitcoin to be sold to the public. ETFs will allow investors to hold bitcoin as easily as stocks or mutual funds.
After losing the Grayscale lawsuit last year, the SEC recent move to rein in cryptocurrencies was fragilised. Its own approval of future bitcoin ETF in 2021 did not help either.
Pressure from asset managers increased when BlackRock, the world’s largest money manager with a near-perfect record of ETF approvals, submitted its own request in June 2023. All 11 applications filed by asset managers including BlackRock, Fidelity Investments, ARK Investment Management, Invesco, WisdomTree, Bitwise Asset Management, Valkyrie and Grayscale Investments were approved to list.
Dissenting SEC’s commissioner Caroline Crenshaw called the move “unsound and ahistorical,” saying it puts the agency “on a wayward path that could further sacrifice investor protection,” according to the WSJ.
“This is going to open the floodgates for every type of crypto token and scam you can think of that’s going to be trying to get SEC approval.” said Dennis Kelleher, president of Better Markets, according to the WSJ.
Bitcoin, the digital gold (rush) and the law
Social life did not wait the web to become artificial. It has been so since ever. And digital objects are not its only artefacts. Legal objects predated them by centuries… Now, bitcoin (and other digital currencies) has been claimed to be digital gold. As a matter of fact, it is a digital object with yet an uncertain legal form.
Not only investor protection but financial stability may be at issue. The SEC showed once more its inability to resist market-based finance pressure to issue and trade virtually anything, including functionless digital objects laden with a track record of fraud and market manipulation.
Through ETF listing, bitcoins and other cryptocurrencies may enter the market-based liquidity creation process which dominates shadow banking.1
At the end of this consequential saga, you may expect the FED to load its balance sheet with those fictitious assets when those markets and trading actors become distressed, as it was the case with asset-backed securities in the aftermath of the North-Atlantic Crisis of 2007-08.
See "Central Banking in Perilous Times: An Open-Ended Chronicle" Accounting, Economics, and Law: A Convivium, vol. 13, no. 2, 2023, pp. 49-102. https://doi.org/10.1515/ael-2023-0007