Approving bitcoin ETFs in the US

In the past few weeks, crypto has been in the news once more due to expectations that bitcoin exchange-traded fund (ETF) submissions will be approved by the UK Securities and Exchange Commission (SEC). 

On Monday October 16, the bitcoin price skyrocketed due to an industry rumour that Blackrock bitcoin ETFs had been approved (they had not, and news reports that it had been retracted). One week later, on Monday October 23, bitcoin prices jumped again when the iShares bitcoin ETF was listed on the Depository Trust and Clearing Corporation with the ticker ‘IBTC’. This was later described as a standard process in bringing new ETFs to the market and not a confirmation of approval.  

Both pieces of news fuelled optimism in the industry that bitcoin ETFs will be approved by the SEC in the coming months, with many believing that this will be a game-changer for the industry. 

Now, the interesting thing is that bitcoin ETFs have been live in Canada and Europe for a while. So why would an approval in the US be so important? 

Let’s back up and understand the history and what has led to where we are today. 

Ten years ago, Tyler and Cameron Winklevoss (the twins who were involved with the founding of Facebook) submitted the first bitcoin ETF to the SEC. Ever since, many other high-profile companies have submitted bitcoin ETFs, but the SEC rejected every single one of them. 

Fast forward a decade, and BlackRock altered the discourse by submitting a bitcoin ETF proposal to the SEC. As the world’s largest asset manager, BlackRock’s submission signalled a change in how traditional finance (TradFi) perceive the crypto and Web3 industry and had a clear shot of bringing such a product into the market (note that BlackRock has a 99.8% rate of ETF approvals). Driven by this news, many other prominent names in TradFi followed suit and submitted bitcoin ETFs.  

Ever since, optimism has been growing in the industry, culminating in the frenzy in the past few weeks due to misleading news. 

While the industry needs good news, depressed by years of rejection from the SEC and FTX scandal, the approval of the bitcoin ETFs in the US could be the turning point for this industry.   

ETFs will provide a legitimate and easy way for mainstream investors to invest in this new asset class (without having to hold bitcoin), and many believe billions of dollars could flow into the market, driven by institutional investor interest.

But the main benefit will come from what it represents. ETF approvals in the US would provide regulatory clarity and catalyse broader integration with traditional institutions interested in engaging in the industry. 

While on the surface, the industry seems to be retreating, behind the scenes, Web3 teams are building. Additionally, traditional players are more than ever driving pilots and experiments, with tokenisation and stablecoins use cases at the forefront this year. TradFi is clearly interested in exploring the industry’s benefits but has not developed their experiments into live solutions due to regulation (or lack thereof). 

Note that some countries have already delivered live and popular regulatory frameworks. Still, the US is one of the biggest markets for many global institutions and the existing approach of regulation by enforcement (adopted in the US) is driving big incumbents to put a break on solutions and follow a “wait and see” approach. 

The SEC approval would legitimise not only bitcoin but the entire crypto industry, paving the way for more TradFi adoption and engagement in the industry. And the reality is that for this industry to thrive, it will need mainstream adoption and liquidity from TradFi players. Instead of continuing the “them” and “us” discussion, TradFi and Web3 players are now working together to give the legitimacy the market needs. Note how many ETFs have been submitted as a partnership between TradFi and Web3 players like Coinbase. 

However, the speculation, misinformation and volatility in the past few weeks are not helping to legitimise the industry. For too long, this industry has suffered from bad publicity, with many players fixated on price volatility, buying and dumping crypto as they see fit. Instead, we need to start redirecting the focus onto the benefits and the financial innovation that can be achieved with this new technology. 

Rita Martins is a financial services executive, advisory board member and author. 

Any views represented in this article are personal and belong solely to the owner and do not represent those of people or organisations that the owner may or may not be associated with in professional or personal capacity.