Why a US bitcoin ETF is a game-changer for crypto
Multiple asset managers have applied for bitcoin ETFs since 2013, but the SEC rejected them on the grounds they would be vulnerable to market manipulation. In August, however, a court found the SEC was wrong to reject Grayscale Investments' bitcoin ETF application, forcing the agency to rethink its stance.
On Wednesday, SEC approved applications from ARK Investments, BlackRock and Fidelity, among others. Here is how the products work and why the approval is seen as a big deal:
HOW WILL THE ETFS WORK?
They will be listed on Nasdaq, NYSE and the CBOE. Their assets will comprise physical bitcoin purchased from crypto exchanges and held via custodians like Coinbase Global.
Did you Know?
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View Details» The products track a bitcoin benchmark. Some track an index provided by CF Benchmarks, a subsidiary of crypto exchange Kraken, which aggregates trading data from multiple Bitcoin-USD markets operated by big cryptocurrency exchanges.
To address the SEC's manipulation concerns, Nasdaq and CBOE have created a market surveillance mechanism with Coinbase, the largest U.S. cryptocurrency exchange.
Issuers plan to charge fees ranging from 0.20% to 0.8%, well below the broader ETF market average.
IS IT DIFFERENT TO BUYING BITCOIN OUTRIGHT?
Yes. A spot bitcoin ETF allows investors to gain exposure to the price of bitcoin without the complications and risks of owning bitcoin directly. Those include setting up crypto wallets and accounts with crypto exchanges, some of which have poor cyber security records and are prone to hacks.
The industry has also
