Spot bitcoin exchange-traded funds (ETFs) are cleared to begin trading Thursday after receiving regulatory approval on Wednesday from the U.S. Securities and Exchange Commission (SEC).

11 Spot Bitcoin ETFs Approved

The regulator gave the green light to the following products:

• ARK 21Shares Bitcoin ETF (ARKB)
• Bitwise Bitcoin ETF (BITB)
• Fidelity Wise Origin Bitcoin Trust (FBTC)
• Franklin Bitcoin ETF (EZBC)
• Grayscale Bitcoin Trust (GBTC)
• Hashdex Bitcoin ETF (DEFI)
• Invesco Galaxy Bitcoin ETF (BTCO)
• iShares Bitcoin Trust (IBIT)
• Valkyrie Bitcoin Fund (BRRR)
• VanEck Bitcoin Trust (HODL)
• WisdomTree Bitcoin Fund (BTCW)
  

In a bid to appeal to investors, many issuers slashed and offered waivers to their spot bitcoin ETF fees ahead of the SEC nod.

A Long Wait for Spot Bitcoin ETFs

It has been a long road for the approval of a spot bitcoin ETF in the United States. The journey began in 2013 when an entity affiliated with the Winklevoss twins sent the first application for such a financial product to the SEC.

While that application was eventually rejected, bitcoin ETFs based on futures products were eventually approved by the SEC starting in 2021. Up until now, a large number of spot-based bitcoin ETF applications had been rejected on the grounds that bitcoin's unregulated nature creates too much risk for investors. Crypto asset manager Grayscale eventually sued the SEC to force more clarity on the matter.

However, it was Blackrock's (BLK) application for a spot bitcoin product in June last year that gathered momentum behind the idea. As the investment giant from traditional finance stepped into the arena, many others such as Fidelity and Franklin Templeton followed suit. This was seen as a sign that regulatory approval was on the way due to the firms' pivotal role in the U.S. financial system.

While regulators and issuers went back and forth to iron out details, there were some last-minute glitches. An unauthorized post announcing the approval on social media platform X from the SEC's account on Tuesday sent bitcoin prices soaring past $48,000 before the regulator clarified that its X account had been compromised.

What This Regulatory Approval Means for Bitcoin

The SEC's sign-off serves as a significant regulatory seal of approval for the world's largest crypto asset, likely reducing some investor fears about investing in the space. It not only brings more regulatory safeguards but allows investors to invest with well-established financial firms. But SEC Chair Gensler warned investors to consider risks before putting their money into the product.

"While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto," said Gensler in a statement.

Until now, retail investors have only been able to gain cryptocurrency exposure by buying coins directly or through ETFs that trade in cryptocurrency futures. A spot bitcoin ETF will allow investors, especially retail investors, to gain access to bitcoin without needing to hold their investment in a bitcoin wallet. Instead, they simply hold the ETFs in their brokerage account.

Analysts expect significant amounts of money to flow into bitcoin spot ETFs, and that optimism has helped boost the price of bitcoin substantially in recent months.

According to estimates from Bloomberg Intelligence, the spot bitcoin ETF market could grow to $100 billion over time. Financial services provider Galaxy estimates inflows in spot bitcoin ETF products could rise from $14 billion in the first year to $39 billion within three years.

Update—Jan. 10, 2024: This article was updated to add comments from the SEC.