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Jan 11, 2024

With the first Bitcoin ETFs approved by the SEC, cryptocurrency IR might be about to hit the mainstream

News is mixed bag for retail investors, but has wider market implications

I imagine I wasn’t alone in assuming it was another crypto scam when the SEC appeared to say that it had approved the listing of spot Bitcoin ETFs earlier this week.

For one, it was announced in a post made on X, the social media site formerly known as Twitter, a hotbed of bot posts and less-than-honest activity since its acquisition by Elon Musk in 2022. The post was also taken down within 24 hours, with the SEC saying hackers had accessed its account to make the false announcement. Approval had not yet been given, the regulator said.

But then on Wednesday the SEC said that – actually – it had approved the first 11 ETFs, giving Bitcoin investors further proof that the future of the capital markets lies somewhere on the blockchain.

With sponsors ranging from Fidelity and Invesco to crypto-focused newcomers like Grayscale, the first funds started trading on Thursday morning. BlackRock’s bigwigs were invited to ring the opening bell at Nasdaq to promote the asset manager’s new iShares Bitcoin Trust product.

While these are not the first spot Bitcoin ETFs to be made available anywhere, they are the first to be approved for general sale on the US market, and are likely to herald not just a nice price bump in the underlying assets, but also a new era of legitimacy for cryptocurrency.

It also marks a U-turn by regulators, which have long held the stance that cryptocurrencies are rife with fraud and open to market manipulation. Many consumer protection groups are still warning that making them available via an ETF will encourage even more retail investors to throw their savings into these assets, which are still relatively volatile in pricing and not alien to scandals.

Dennis Kelleher, president of Better Markets, told the FT yesterday that the SEC’s approval ‘is a historic mistake that will not only unleash crypto predators on tens of millions of investors and retirees but will also likely undermine financial stability.’

Unlike in the EU or the UK, laws protecting consumers from these shocks are not yet forthcoming in the US. The SEC does not seem well equipped to tackle the problems inherent in a system that prizes and protects crypto-holders’ anonymity.

While the implications for IR are unlikely to be direct, it does mark an important step in the evolution of the capital markets. If the SEC, one of the world’s most skeptical regulators, can judge crypto to be acceptable, the floodgates may open for its wider acceptance.

Crypto purists would, however, rather it herald the start of a decentralized world where oversight from governments and regulators is non-existent. But more pragmatic crypto bulls think regulatory approval will be the key to digital asset markets opening up, and prices therefore rising.

IROs at publicly listed companies are unlikely to experience much competition for capital with crypto ETFs. But their addition to the markets is likely to have unseen, knock-on effects with capital flows more widely.

What do you expect this news to change in the capital markets? Is this the beginning of a wider change, or just the latest regulatory capitulation to pressure from ETF providers? As always, please let us know, either on Linkedin or via email at laurie.havelock@irmagazine.com.

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