‘Circumstances Have Changed’: Gary Gensler Relents on Bitcoin ETFs

In a statement announcing the approval of several spot Bitcoin ETFs, U.S. Securities and Exchange Commission chair Gary Gensler released a statement about the road to approval, using the unsually bright spotlight on his platform to again caution investors about investing in cryptocurrency.

"I have often said that the Commission acts within the law and how the courts interpret the law,” Gensler said. “Beginning under Chair Jay Clayton in 2018 and through March 2023, the Commission disapproved more than 20 exchange rule filings for spot bitcoin [Exchange Traded Product].”

“Circumstances, however, have changed,” he conceded, saying the SEC was mulling similar spot Bitcoin ETF filings like those previously denied.

“The U.S. Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order),” Gensler wrote.d

“Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares,” he said.

Gensler noted that today’s ETF approvals only apply to Bitcoin and not the entire cryptocurrency marketplace.

"While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse Bitcoin,” he wrote. “Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto."

“It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities,” Gensler continued. “Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.”

Gensler took the opportunity to assert, once again, that most crypto assets are investment contracts and subject to federal securities laws.

While Gensler's statement and the SEC’s approvals may seem like capitulation, others in the agency continue to disagree with spot Bitcoin ETFs.

“Today the Securities and Exchange Commission approved a series of proposed rule changes that will allow for the listing and trading of bitcoin-based products on national securities exchanges,” SEC Commissioner Caroline Crenshaw wrote in a statement. “These Commission actions are unsound and ahistorical. And worse, they put us on a wayward path that could further sacrifice investor protection.

“I cannot agree that these actions serve either our statutory or foundational investor protection mandates and, as such, I dissent from today’s Order,” Crenshaw concluded.

Her main complaints about spot Bitcoin ETP approval centered around the risks of market manipulation, inadequate investor protection, and inconsistent decision-making, saying that the new rules are not designed to protect investors or the public interest.

Crenshaw also pointed to a concentration of ownership about spot Bitcoin holders, saying it leaves Bitcoin investors vulnerable to “the whims and trading practices of a few.”

“Among the reasons that crypto markets – including bitcoin spot markets,” Crenshaw continued. “Appear to be Petri dishes of fraudulent conduct is because there is little to no systemic oversight of these markets, nor other sufficient mechanisms in place for the detection and deterrence of fraud and manipulation.”

Edited by Ryan Ozawa.

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