- US Security and Exchange Commission (SEC) approves listing and trading of Bitcoin ETFs
- Announcement came after an unauthorised post on the SEC’s X account saying that Bitcoin ETFs had been approved prior to the official announcement
- Mixed prospects for similar regulatory approval in the UK
Laith Khalaf, head of investment analysis at AJ Bell, comments:
“The decision by the SEC to permit the launch of Bitcoin ETFs a is a giant step for crypto into the mainstream. This will open up new pools of capital and potentially offer safer access to crypto through well-regulated and widely used fund providers. The long-term adoption of crypto by investors is still highly uncertain, and it’s important to note that thematic ETF launches can be quite faddy. But nonetheless this represents a watershed moment in the history of crypto, which might just be the beginning of it creeping into the tent of more traditional asset classes.
“Although even with the SEC approval, it isn’t a slam dunk that we will get one over here because the UK regulator may not approve their sale. US ETFs are not available for sale in the UK because they don’t issue a Key Investor Document, so fund groups would need to launch funds specifically for the European or UK market. In 2021 the FCA banned the sale of ETNs (Exchange Traded Notes) containing ‘unregulated transferable cryptoassets’ – these contained really complex whizzy derivatives and financial engineering to gain exposure to the asset class. The reasons given by the FCA at the time were that crypto had no inherent value, was wildly volatile, rife with financial crime, and didn’t fulfil a financial planning need for investors. It’s difficult to make a case that any of that has changed.
“However, the UK regulatory landscape is also shifting, with crypto activities being brought under the supervision of the FCA, so this may pave the way for crypto ETFs at some point in the future. If or when that might happen is anyone’s guess. The FCA is walking a bit of a tightrope here between keeping consumers safe and the government’s ambition to make the UK a global hub for cryptoasset technologies. Bitcoin has endured a number of scandals and huge price volatility, but large investment groups are clearly still interested in packaging it into a tradeable product for punters. This is presumably because there would be large consumer demand for Bitcoin ETFs, but sometimes you should be careful what you wish for. It’s hard to make a case that crypto fulfils a genuine financial planning need that can’t be met by other assets, but it definitely does open up investors to the possibility of very heavy losses.”
