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Democrats Dissent On SEC Spot Bitcoin Approval, Gensler Distances Himself From 'Terrorist-Financing' Crypto

Tyler Durden's Photo
by Tyler Durden
Authored...

Following yesterday's false start, it appears the SEC has now officially approved a spot Bitcoin ETF... and screwed-up the release AGAIN!

 

The SEC dropped the following at this link... "Order Granting Accelerated Approval"

Then pulled the link.

So another false start, but...

As Bloomberg's James Seyffart noted:

"It certainly looks like the #Bitcoin ETF Approval order had hit the SEC website."

And Bloomberg's Eric Balchunas summed it up perfectly:

"It's over, thank god!"

ETF Store's Nate Geraci seemed confident:

Grayscale confirmed:

“I am happy to confirm that the Grayscale team has received necessary regulatory approvals to uplist GBTC to NYSE Arca, and we will share a press release with additional information shortly."

Coinbase is pleased:

"The SEC’s approval of 11 spot bitcoin ETFs, eight of which are partnered with Coinbase, is a watershed moment for the expansion of the cryptoeconomy," the company said in a blog post.

"Spot bitcoin ETFs introduced by the world’s largest asset managers will unlock diversified pools of new investors to spur long-term growth and product innovation."

There are more than a dozen applications pending with the SEC:

iShares Bitcoin Trust (BlackRock)

Jane Street Capital, JP Morgan Securities, Macquarie Capital, and Virtu Americas have all been named as authorized participants for BlackRock's Bitcoin ETF.

VanEck Bitcoin Trust (VanEck)

Jane Street Capital, Virtu Americas LLC, and ABN AMRO Clearing have all signed agreements to act as authorized participants.

Franklin Bitcoin ETF (Franklin Templeton)

Jane Street Capital and Virtu Americas have each signed authorized participant agreements with Templeton.

Fidelity Wise Origin Bitcoin Trust (Fidelity)

Fidelity names Jane Street Capital, JP Morgan Securities, Macquarie Capital, and Virtu Americas LLC as authorized participants for its Bitcoin ETF.

Valkyrie Bitcoin Fund (Valkyrie)

Jane Street Capital and Cantor Fitzgerald & Co. have signed authorized participant agreements with Valkyrie.

WisdomTree Bitcoin Fund (WisdomTree)

The latest filing from WisdomTree shows lists Jane Street Capital, Macquarie Capital, and Virtu Americas as authorized participants.

Invesco Galaxy Bitcoin Fund (Invesco, Galaxy Digital)

JP Morgan Securities, Virtu Americas, Jane Street Capital, and Marex Capital Markets Inc. have all signed authorized participant agreements with Inveso.

Bitwise Bitcoin ETF (Bitwise)

Jane Street Capital, Macquarie Capital, and Virtu Americas have signed on to be authorized participants for Bitwise's Bitcoin ETF.

Grayscale Bitcoin Trust (Grayscale)

Jane Street Capital, Virtu Americas, Macquarie Capital, and ABN AMRO Clearing have all signed authorized participant agreements with Grayscale.

ARK 21Shares Bitcoin ETF (ARK Invest, 21Shares)

Jane Street Capital, Macquarie Capital, and Virtu Americas will be authorized participants for ARK's Bitcoin ETF.

And they all appear to be approved...

And the big one (IBIT) is already on Bloomberg:

Additionally, good news for investors is that an apparent 'fee war' has broken out among ETF providers, according to Bloomberg Intelligence ETF Analyst James Seyffart.

“That's going to trickle into the crypto ecosystem,” he told Coinage in a Monday interview.

“Look for commissions on some of these platforms that are typically trading [Bitcoin] to start tightening in competition with these ETFs once they're launched.”

As we noted after last night's false start, ETFs could technically start trading tomorrow since the Cboe BZX Exchange earlier gave notice of approved securities listings from several asset managers.

In Jan. 10 letters filed with the SEC, Cboe said it had approved spot BTC ETF offerings from ARK 21Shares, Invesco Galaxy, Fidelity, VanEck, WisdomTree and Franklin Templeton. The deadline for final approval or denial of the spot Bitcoin ETF from ARK 21Shares is Jan. 10, leading to speculation that the SEC may approve multiple offerings from asset managers simultaneously.

“In order to facilitate timely listing, the Exchange requests acceleration of registration of these securities under Rule 12d1-2 of the Securities Exchange Act of 1934, as amended,” said the Cboe.

SEC Chair Gary Gensler followed up the official SEC approval statement with his own, full of more cover-your-ass comments distancing himself from crypto, and a lot of 'coping' and 'seething'...

Here's the highlights (lowlights): 

Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.

...

Today’s action does not approve or endorse crypto trading platforms or intermediaries, which, for the most part, are non-compliant with the federal securities laws and often have conflicts of interest.

...

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.

TL/DR: "please dont fire me, pocahontas"

Meanwhile, the only two dissenters to the approval of the spot bitcoin ETF were Democrats...

Pro-Crypto SEC Commissioner Hester Peirce 'unleashed hell' on the "unnecessary, but consequential saga" that wasted a decade to finally approve the first spot bitcoin ETF...

Today marks the end of an unnecessary, but consequential, saga. More than ten years after the filing of the first spot bitcoin exchange-traded product (“ETP”) application, the Commission finally has approved multiple applications by exchanges to allow the listing and trading of spot bitcoin ETPs. This saga likely would have spanned well beyond a decade were it not for the DC Circuit-ex-machina. You need not be a seasoned securities lawyer to spot the difference in treatment of bitcoin-related ETP applications compared to the many other ETP applications that have been routinely filed and approved over the past decade.

ETPs are an important innovation. Through them, investors can gain exposure to securities and non-securities, such as precious metals, in a convenient vehicle. Even if that exposure is available directly elsewhere, the ETP structure offers its own advantages. ETP shares trade continually on national stock exchanges at market prices, much as regular stocks do. By creating and redeeming shares of the fund, institutional traders, called authorized participants, help to maintain the price of these shares in line with the price of the assets in the investment pool. ETPs are accessible to investors and operate within the framework of the federal securities laws.

Since I became a Commissioner six years ago, one of the questions I have been asked most frequently is “When will the Commission approve a spot bitcoin ETP?” For reasons I have explained many times before, the logic of the long string of denials is perplexing. Predicting approval timelines for spot bitcoin ETPs was impossible because the review process for these filings did not resemble the fairly straightforward processes for approving comparable ETPs. The goalposts kept moving as the Commission slapped “DENIED” on application after application.

Bitcoin-based products have been trading for years under other regulatory regimes. In 2017, for example, the CME and the CBOE, which are regulated by the Commodity Futures Trading Commission, listed bitcoin futures. Foreign jurisdictions have long allowed spot bitcoin ETPs to trade. The Commission should have drawn comfort from the successful launch and smooth trading of these products, even through market stress and volatility. Instead, until today, the Commission remained steadfast in its unwillingness to let spot bitcoin ETPs into US markets.

In the meantime, the Commission has driven retail investors to less efficient means of attaining bitcoin exposure in the securities markets. For example, retail investors could hold it through non-exchange traded products or get some exposure by buying into companies or funds that owned or mined bitcoin. And, in 2021, bitcoin futures exchange-traded funds (“ETFs”), registered under the 1940 Act, started to trade given the Commission had no legal basis for stopping them. In 2022, the Commission approved the trading of bitcoin futures ETPs registered under the 1933 Act. These futures-based products are more complex and more difficult to manage than the spot product, which can translate into higher costs for investors. In any case, the Commission’s basis for letting these products trade should have been an equally compelling basis for letting spot products trade: the correlation between the bitcoin futures prices and the spot prices is high, which means that the regulated futures market is as relevant for a product based on spot bitcoin as it is for a fund investing in bitcoin futures. But, until a court reminded us that our “unexplained discounting of the obvious financial and mathematical relationship between the spot and futures markets falls short of the standard for reasoned decisionmaking,” we persisted in denying a spot bitcoin ETP.

The Commission, rather than admitting error, offers a weak explanation for its change of heart. In the past, the Commission, allowing our prejudice against the underlying asset to get in the way, has rejected applications on the basis that the bitcoin market was still immature and that there were outstanding manipulation concerns. Today’s approval order notes that the Commission now finds that means for “preventing fraud and manipulation” have been demonstrated because the prices on the CME bitcoin futures market and the spot bitcoin markets have been highly correlated throughout the past two-and-a-half years. We have denied multiple applications over that period, depriving investors of the opportunity to gain exposure to bitcoin in a more convenient and investor-friendly way. The only material change since we last denied a similar application was a judicial rebuke.

We squandered a decade of opportunities to do our job. If we had applied the standard we use for other commodity-based ETPs, we could have approved these products years ago, but we refused to do so until a court called our bluff. And even now our approval comes only begrudgingly, as demonstrated by our continued insistence that these products satisfy a correlation test we have not demanded of prior commodity-based ETPs. Perhaps the one silver lining here is now that we know that the Commission can execute a robust correlation analysis, perhaps the road to approving other spot crypto ETPs will not be as bumpy (even if the Commission insists on continuing to apply a test it applies nowhere else).

Today’s order does not undo the many harms created by the disparate treatment of spot bitcoin products.

  • First, our arbitrary and capricious treatment of applications in this area will continue to harm our reputation far beyond crypto. Diminished trust from the public will inhibit our ability to regulate the markets effectively. This saga will taint future interactions between the industry and our staff and will dampen the rich, informative dialogue that best protects investors.

  • Second, our disproportionate attention on these filings has diverted limited staff resources away from other mission critical work. Over ten years, likely millions of dollars of staff time has gone toward blocking these applications.

  • Third, our actions here have muddied people’s understanding of what the SEC’s role is. Congress did not authorize us to tell people whether a particular investment is right for them, but we have abused administrative procedures to withhold investments that we do not like from the public.

  • Fourth, by failing to follow our normal standards and processes in considering spot bitcoin ETPs, we have created an artificial frenzy around them. Had these products come to market in the way other comparable products typically have, we would have avoided the circus atmosphere in which we now find ourselves.

  • Fifth, we have alienated a generation of product innovators within our space. Our unreasonable approach to these applications has signaled that regulatory prejudice against new products and services can lead us to sidestep the law and unreasonably delay product launches. The industry has logged hundreds of meetings, has filed submissions, withdrawals and amendments, and ultimately had to resort to a costly legal battle to get us to today.

Although this is a time for reflection, it is also a time for celebration. I am not celebrating bitcoin or bitcoin-related products; what one regulator thinks about bitcoin is irrelevant. I am celebrating the right of American investors to express their thoughts on bitcoin by buying and selling spot bitcoin ETPs. And I am celebrating the perseverance of market participants in trying to bring to market a product they think investors want. I commend applicants’ decade-long persistence in the face of the Commission’s obstruction.

Roughtly translated, her message is clear...

*  *  *

The reaction in crypto appears to be reflective of what we suggested last night...

As ETH rallies hard relative to BTH, trading up above $2500...

...erasing all of the YTD relative weakness...

In the greatest twist of fate, this news comes exactly one year after CNBC's Jim Cramer told listeners to "get out of crypto" as "it can't be trusted." That was 175% ago...

Meanwhile, during an interview with FOX Business Network's Maria Bartiromo, JPMorgan CEO Jamie Dimon reiterated his long-held belief that crypto is fraud:

“The actual use cases are sex trafficking, tax avoidance, anti-money laundering, terrorism financing,” Dimon said.

“I’ve always said Bitcoin doesn’t have value.”

Fwd to around 7:15 mark:

Which is ironic given that global investment giant BlackRock named JP Morgan as an active participant in its pending ETF filing with the SEC.

Finally, on a side note, the desperation of the mainstream media to somehow blame Elon Musk, or X, for the SEC's utter lack of professionalism is [insert word that implies amazement but not shock because this is exactly what we thought would happen].

As we detailed earlier, with fingers being pointed and blame being apportioned for the SEC screw-up, X's Safety team have provided a rather awkward statement on the results of their probe of the breach.

We can confirm that the account @SECGov was compromised and we have completed a preliminary investigation.

Based on our investigation, the compromise was not due to any breach of X’s systems, but rather due to an unidentified individual obtaining control over a phone number associated with the @SECGov account through a third party.

We can also confirm that the account did not have two-factor authentication enabled at the time the account was compromised.

We encourage all users to enable this extra layer of security.

And there it is, just as the mainstream establishment would have loved to blame Elon Musk, or X, it turns out the world's leading securities regulator was incapable of utilizing two-factor authentication on an account that by all standards can be extremely market-moving in its capabilities.

Of course, these FACTS did not stop 'journalists' running with the narrative that it's all Elon's fault...

The SEC said on Wednesday that the FBI was probing the incident.

Sigh...

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