U.S. Gary Gensler, the chair of the Securities and Exchange Commission (SEC), released this statement following the approval of spot bitcoin ETFs by regulators.

Jan. 10, 2024

Today, the Commission has approved the listing of and trading in a number spot bitcoin exchange traded product (ETPs) shares.

I have said many times that the Commission is bound by the law, and the interpretation of the law as it is by the courts. The Commission has disapproved over 20 exchange rule submissions for bitcoin spot ETPs, starting in 2018 under the chairmanship of Jay Clayton and continuing through to March 2023. Grayscale submitted one of these filings that contemplated the conversion from the Grayscale Bitcoin Trust to an ETP.

Now we are faced with new filings that look similar to the ones we disapproved previously. The circumstances have changed. The U.S. Court of Appeals for the District of Columbia ruled that the Commission had failed to explain adequately its reasons for disapproving the listing of Grayscale’s ETP proposal (the Grayscale Order). The court vacated Grayscale Order, and sent the matter back to the Commission. In light of the circumstances discussed in the approval decision, and the ones that are more detailed, I believe the best way to proceed is to approve listing and trading these spot bitcoin ETPs.

The Commission will evaluate any rule submission by a national security exchange to determine if it is in compliance with the Exchange Act, and its regulations. It also looks at whether the rule is intended to protect investors or the public. The Commission does not have a bias and will not express an opinion on any particular company, investment, or assets that are underlying ETPs. The Commission must provide the same level of access to our regulated market as everyone else if the Securities Act and Exchange Act are followed by the issuer and listing exchange.

The Commission’s action today is limited to ETPs that hold bitcoin, a non-security commodity. This should not be interpreted as a sign of the Commission’s willingness or ability to approve listing requirements for crypto assets. The approval does not reflect the Commission’s view on the status of crypto assets in relation to federal securities laws, or the state of compliance of crypto asset market participants. The vast majority of crypto-assets are investment contracts, which means they’re subject to federal securities laws.

Investors can buy, sell, or gain exposure to bitcoin today at several brokerage houses, via mutual funds, national securities exchanges and peer-to-peer payment apps. They can also do so on non-compliant crypto-trading platforms and through the Grayscale Bitcoin Trust. Investors will be protected by today’s actions:

Sponsors of bitcoin ETPs must first provide a full, truthful, and fair disclosure about their products. Investors who own bitcoin ETPs that are listed and traded can benefit from the information included in public filings and registration statements. These disclosures are mandatory, but it’s important to remember that the action taken today does not endorse any of the ETP arrangements disclosed, including custody arrangements.

These products will also be listed on and traded at national securities exchanges that are registered. These regulated exchanges must have rules that prevent fraud and manipulative practices. We will closely monitor them to make sure they adhere to these rules. The Commission will also investigate all fraud and manipulation on the securities market, including any schemes that utilize social media platforms. These regulated exchanges have also developed rules to deal with certain conflicts of interests, as well as protect investors and public interest.

In addition, the existing rules and conduct standards will be applied to the purchase and sales of approved ETPs. For example, broker-dealers are required to follow Regulation Best Interest in recommending ETPs for retail investors. Investment advisers also have a fiduciary responsibility under the Investment Advisers Act. The action taken today does not endorse or approve crypto trading platforms and intermediaries. These are, for the majority, non-compliant to federal securities laws, with many having conflicts of interest.

Third, staff at the Commission is simultaneously reviewing 10 spot bitcoin ETPs. This will create an even playing field and encourage fairness and competition for investors, as well as the wider market.

This agency has been overseeing non-security commodity ETPs since 2004. These include those that hold certain precious metals. This experience will prove valuable as we oversee spot bitcoin ETPs.

Although we are merit-neutral, I would note that the underlying metals ETPs serve both consumer and industrial purposes, while bitcoin is primarily volatile and speculative. It’s also used to finance illicit activities such as ransomware and money laundering.

We did not endorse or approve bitcoin. While we approved today the listing and trading certain spot bitcoin ETPs, we didn’t endorsing it. Investors need to be aware of the risks that are associated with Bitcoin and other products whose values are tied to crypto.