Bitcoin ETF: Launching an investment fund to track price growth in the U.S. after a case of Sam Bankman-Fried

A settlement with the U.S. government was announced shortly after it was announced that the founder of the world’s largest online currency exchange had been convicted of violating anti-money-laundering laws.

In 2023, the SEC and other financial regulators brought a series of lawsuits against crypto companies and investors, and the U.S. Department of Justice won its case against disgraced crypto mogul Sam Bankman-Fried, who is scheduled to be sentenced in March.

The SEC account had been compromised, and the commissioners weren’t making a decision about it. X’s safety team confirmed that the account wasn’t password protected and didn’t have two-factor authentication on it, which makes it a hacked account.

It’s getting a big boost. On Wednesday, Wall Street’s top cop, the Securities and Exchange Commission (SEC), approved a bitcoin ETF, an investment fund that will track bitcoin prices, and will pave the way for more of the public to buy it.

It continued to rise after the Federal Reserve released its latest summary of economic projections at the end of December, indicating policymakers anticipate cutting interest rates in 2024. When interest rates are lower, investors are more comfortable making riskier bets.

The U.S. Says Yes to New Bitcoin Funds, paving the way for More Americans to buy Crypto, [Npr.org/02261640]

The company has operated a different kind of investment product, called a bitcoin trust, and it had asked the SEC for permission to convert that into an ETF. The judge found that the SEC’s rejection of the application was unfair.

The approval of spot bitcoin ETFs will appeal to regular investors, but it is also likely to make the cryptocurrency something that more institutional investors can buy into. Funds are restricted from buying investments that are not regulated.

In the years since, the crypto world has evolved and expanded, and the SEC conceded companies had adequately responded to many of the questions. Regulators were concerned about the potential for market manipulation until recently.

She wrote that there are a number of important issues to be examined before the funds are offered to retail investors.

While teaching at the University of Texas Law School, Henry Hu says that the involvement of these big investment firms will make people think negatively of cryptocurrencies.

“After a long time, we are finally at the point where the regulator is willing to give us clear guidance in regards to what’s legal and what’s not”, says Sarit Markovich, professor in the Kellogg School of Management.

ETFs are regulated by the SEC, and that is a big reason why Wednesday’s decision by the agency is so significant. The SEC’s imprimatur is important as it is regulatory clarity.

Source: U.S. says yes to new bitcoin funds, paving the way for more Americans to buy crypto

The Cryptocurrency Scenario: A Case in Point: SEC Rules on Coinbase, Kraken, Valkyrie Investments

“There’s no signing up with a crypto exchange, managing a wallet, God forbid losing your private key to whatever bitcoin you own,” he says. “It certainly will get bitcoin into more people’s hands.”

According to Bryan Armour, director of passive strategies research for North America at Morningstar, these new funds are going to be seen as a safer way to buy and sell cryptocurrencies.

It’s not easy for people to learn how to buy and store digital currency on their own. “A lot of people are still uncomfortable with the technology, and want to have the ability to invest in it. And the best way to do that is really through an ETF.”

In recent years, sites like Coinbase and Kraken have made it easier for people to buy and sell bitcoin and other cryptocurrencies. But according to McClurg, there are still big barriers to entry.

Steven McClurg, the co-founder of Valkyrie Investments, which successfully applied for a bitcoin spot ETF, says the SEC’s decision will widen the appeal of cryptocurrencies.

Despite months of negative headlines, the run-up has continued despite the successful prosecution of one of the biggest players in crypto, and more recently the law enforcement targets of investors and executives.

Custodians for the Spot Bitcoin ETF Issuers: How Many Coinbases and Geminis Are Accepted?

As such, the spot bitcoin ETF issuers will share a small group of service providers, at least at launch. Between them, crypto exchanges Coinbase and Gemini will provide custody services for practically all the new ETFs. Only JPMorgan, Cantor Fitzgerald, Virtu Financial, and Jane Street, all multinational financial services firms, have signed on as APs to date.

US regulators have approved a new breed of financial product that will give people a way to invest in bitcoin through their brokerage for the first time, as if it were a regular stock.

The arrival of the spot bitcoin ETFs has been celebrated among investors as a source of new demand for the asset—now available in a more accessible format—that could push up the price. Yet a significant portion of the financial upside will be captured behind the scenes, not in the open market.

The issuers of the exchange traded fund will collect a management fee for every share they sell. One layer deeper, though, another subset of companies—intermediaries that provide the plumbing necessary for a spot bitcoin ETF to function—stand to earn big. The issuers are responsible for storing digital currency on their behalf, as well as appointing custodians, or creating new exchange traded fund (ETF) shares, in the case of authorized participants. Market makers help price and smooth out trades in the public market, and they’re also called third-party pricemakers.

The pool of firms that perform these trading-related functions is limited, says James Seyffart, ETF research analyst at Bloomberg Intelligence, partly because of the amount of cash required to deal with large quantities of assets flowing in and out the door. The difficulties of handlingbitcoin, which sits on completely different technical rails than regular shares, restricts the diagram of willing and qualified candidates for custody. “It’s a whole different area,” says Seyffart.