The era of Bitcoin ETPs arrives

More than 10 years after filing the first spot Bitcoin exchange-traded product (ETP) application, the U.S. Securities and Exchange Commission has finally approved multiple applications to allow the listing and trading of spot Bitcoin ETPs. Eleven funds were launched on the day after approvals were given. What is ETP? The approval of ETPs on Bitcoin marks a paradigm shift for digital assets. ETPs are a convenient instrument. Through them, investors can gain exposure to securities and non-securities, such as precious metals. ETP shares trade continually on national stock exchanges at market prices. Authorized participants, largely institutional traders, create and redeem shares of the fund. This helps to maintain the price of these shares in line with the price of the assets in the investment pool. ETPs are accessible to investors, both retail and institutional, and operate within the framework of the federal securities laws. The legal fight Bitcoin-based products have been trading for years under other regulatory regimes. In 2017, for example, the CME and the CBOE (regulated by the Commodity Futures Trading Commission) listed bitcoin futures. Retail investors could hold bitcoins through non-exchange traded products or get some exposure by buying into companies or funds that owned or mined bitcoin. And in 2021, Bitcoin futures exchange-traded funds (ETFs) started to trade. In 2022, the SEC approved the trading of Bitcoin futures ETPs. These futures-based products are more complex and difficult to manage than the spot products, translating into higher costs for investors. This was also at the heart of a ruling by a Court of Appeals for the District of Columbia that forced SEC's hand. Grayscale Investments LLC had proposed to convert Grayscale Bitcoin Trust into an ETP. The SEC disapproved of this conversion - a ruling that was challenged in Court. At the crux of the SEC's previous rulings against a spot ETF was the argume

This article was originally published on February 01, 2024.