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Wednesday, January 10, 2024

Spot Bitcoin ETPs Will Arrive Tomorrow

Reported by Neil Anderson, Managing Editor

Spot bitcoin ETFs (er, ETPs?) are coming to America tomorrow.

Gary Gensler
U.S. Securities and Exchange Commission
Today, the U.S. Securities and Exchange Commission (SEC) reversed course on its multi-year fight against such products and opened the door to 11 such products. The approved-and-now-imminently-launching (or, in at least two cases, transforming) funds include: the ARK 21Shares Bitcoin ETF (ARKB on the Cboe BZX); the Bitwise Bitcoin ETF (BITB on the NYSE Arca); the Fidelity Wise Origin Bitcoin Fund (on the Cboe BZX); the Franklin Bitcoin ETF (EZBC on the Cboe BZX); the Grayscale Bitcoin Trust (GBTC on the NYSE Arca); the Hashdex Bitcoin ETF (DEFI on the NYSE Arca); the Invesco Galaxy Bitcoin ETF (BTCO on the Cboe BZX); the iShares Bitcoin Trust (IBIT on the Nasdaq); the Valkyrie Bitcoin Fund (BRRR on the Nasdaq); the VanEck Bitcoin Trust (HODL on the Cboe BZX); and the WisdomTree Bitcoin Fund (BTCW on the Cboe BZX).

At least eight of those new spot bitcoin ETPs, possibly more, are expected to launch on exchanges tomorrow. So far, executives working on ARKB, BITB, BRRR, BTCO, BTCW, EZBC, GBTC, and IBIT have all confirmed that they plan to debut their funds on January 11.


"Through IBIT, investors can access bitcoin in a cost-effective and convenient way," states Dominik Rohe, head of Americas iShares ETF and index investing business at BlackRock. MFWire previously offered more details on BlackRock's bitcoin ETP proposal, as well as the SEC's concerns.


Jan van Eck, CEO of VanEck, writes "We celebrate bitcoin builders — not tourists." He notes that for seven years his team has "been advocating for the approval of an ETF for investors to gain bitcoin exposure without the need for self-custody."

Van Eck highlights that VanEck will donate five percent of HODL's profits to bitcoin developers. The fund comes with an expense ratio of 25bps and is expected to start with $72.5 million in seed capital.

"Very few others have demonstrated this level of alignment with the builders of Bitcoin," van Eck writes. "Instead, they've offered investors gimmicks only to trap them later with higher fees."


The Grayscale team is converting their flagship Grayscale Bitcoin Trust into an ETP under the '34 Act, effective tomorrow. They note that the fund currently holds 3.16 percent of all bitcoin in circulation worldwide.

"The approval of spot Bitcoin ETFs in the United States is a monumental step forward for GBTC investors and all those who realize the potential for crypto to transform our future," states Michael Sonnenshein, CEO of Grayscale. "Today's historic outcome is a testament to GBTC's investors for their unwavering patience and support, and to the entire Grayscale team and our partners for their hard work and dedication."

It's also thanks in part to the Grayscale folks that the SEC made its move today. The SEC's approval comes after it lost a courtroom battle with Grayscale last summer over the regulator's longstanding opposition to Grayscale's GBTC conversion plan.


David Mann, head of ETF product and capital markets at Franklin Templeton, notes that the firm has been offering digital assets investment opportunities since 2019.

"We are encouraged by the SEC's decision and are excited to be at the forefront of providing U.S. investors a simpler means of allocating towards digital assets," states Roger Bayston, head of digital assets at Franklin.


Marcelo Sampaio, co-founder and CEO of Hashdex, and Mike Venuto, co-founder and chief investment officer of Tidal Investments LLC, note that DEFI will launch through the conversion of the existing Hashdex Bitcoin Futures ETF, a $5-million-AUM, '33-Act fund. Tidal will sponsor and administer the converted ETF, BitGo will be custodian, and Hashdex will be digital asset advisor.

"Today's announcement marks the next phase for the industry by allowing U.S. investors to fully participate in the promise of Bitcoin," Sampaio states.

"The conversion of DEFI is the next step in our firm's six-year history of delivering regulated crypto investment products to professional investors across the globe," states Samir Kerbage, CIO of Hashdex.

"The Hashdex Bitcoin ETF has been custom-built to offer investor protections that are unavailable when trading Bitcoin directly in unregulated markets," Venuto states.


Jonathan Steinberg, founder and CEO, puts the launch of BTCW in the context of his firm's "heritage of innovation." He notes that the fund's 30-basis-point expense ratio will be waived for the first six months for the first $1 billion in assets.

"After years of eperience meeting investors' demand for a Bitcoin ETP in Europe, we could not be more thrilled to be at the helm of the movement to accelerate access to digital assets in the United States after years of engagement with U.S. regulators," Steinberg states.


"This is a key step in giving US investors access to bitcoin through the ETF structure, which will offer greater investor protections," an Invesco spokesperson tells MFWire in an emailed statement. "BTCO will benefit from Invesco's deep tenure in the ETF space, Galaxy's extensive relationships with a range of liquidity providers, and Invesco and Galaxy's expertise in managing cash-create ETFs in the US and Canada."


A spokesperson for Valkyrie confirms that BRRR's fees will be waived for the first three months.

"The Valkyrie Team is excited about the approval," the spokesperson tells MFWire. "It has been years in the making for them as a firm that is dedicated to offering digital asset focused ETFs."


Hunter Horsley, CEO of Bitwise, confirms that BITB will debut with an expense ratio of 20bps. The Bitwise team lays claim to that being the lowest price of any of this first batch of spot bitcoin ETPs ... and they will waive that fee for the first six month for the fund's first $1 billion in AUM.

"We expect significant demand for bitcoin ETFs like BITB," Horlsey states.

"We're excited to see bitcoin take its seat at the table alongside other formerly fringe, now mainstream assets like private equity, private credit, and even gold," states Matt Hougan, CIO of Bitwise.

Hong Kim, chief technology officer of Bitwise, confirms that the company will donate 10 percent of BITB's profits to Brink, OpenSats, and the Human Rights Foundation's Bitcoin Development Fund (all of which are non-profits funding open-source bitcoin development).


The Ark- and 21Shares powered ETF will debut with an expense ratio of 21bps. That fee will be waived for the first six months or for the first $1 billion in AUM.

The Ark team pitches ARB as being powered by 21Shares' "operational expertise" (from running crypto ETPs in Europe for five years), Ark's "extensive top quality research" on bitcoin (since the firm's founding a decade ago), and Ark's "dedicated, knowledgable client service team."

Three Commissioners Speak

Gary Gensler, chair of the SEC, draws a clear line between Grayscale's August 2023 court victory and the SEC's approval today of spot bitcoin ETPs.

"I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares," Gensler states. "While we're approving the listing and trading of certain 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."

He also notes that today's SEC action is specific to bitcoin ETPs, not spot ETPs for other crypto assets (like, for example, ethereum). And he can't resist putting in a dig about bitcoin being "a speculative, volatile asset that's also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing."

Commissioner Mark Uyeda shares three concerns about the SEC's action today, worrying about an "underlying analytical approach" that he calls "merit regulation." (Uyeda previously dissented when the SEC declined to approve spot bitcoin ETPs.)

"The flawed reasoning in the Approval Order could reverberate for years to come," Uyeda states.

Commissioner Hester Peirce calls the SEC's action "the end of an unnecessary, but consequential, saga" that has last more than 10 years. (Like Uyed, Peirce previously dissented when the SEC declined to approve spot bitcoin ETPs.)

"We squandered a decade of opportunities to do our job. If we had applied the standards 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," Peirce writes. "I am celebrating the perseverence 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."

Other Takes

"The reality is that investors seem intent on incorporating crypto into their portfolios, regardless of access to ETF products," states Bob Jenkins, global head of research at LSEG Lipper. "Today's approval for spot products may therefore represent an enhanced level of organized oversight and transparency to this asset class, so will likely benefit investors."

David Mercer, CEO of LMAX Digital (an institutional-only crypto exchange), describes the SEC's move as "a pivotal moment that legitimises Bitcoin's future and markets a significant step forward in the convergence of digital assets and traditional finance."

"It is our long-held view that blockchain and tokenisation are the future of capital markets and crypto, as a proxy for that tokenisation, is an essential element of a broad, diversified investment portfolio," Mercer states.

Bradley Duke, chief strategy officer of ETC Group (which powers a large bitcoin ETP in Europe), says that the SEC's action, along with a similar move by regulators in Hong Kong, "goes far to legitimise Bitcoin as an investable global asset."

"Here in Europe, we have had secure and efficient spot Bitcoin ETPs for over 3.5 years and we are spoiled for choice with the range of physically-backed Crypto ETPs available including many different single-asset Crypto ETPs as wellas broad market index products," Duke states.

Michael Silberberg, head of investor relations at Alt Tab Capital (a crypto hedge fund), describes the push towards bitcoin ETPs as "industry consensus" that the SEC could hardly keep standing against.

"Even as we welcome these vehicels to market, it's important to remind investors of all classes that these vehicles will come with restrictions such as cash-only creation/redemption and liquidity tied to market hours," Silberberg states. 

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