Securities and Exchange Commission Chair Gary Gensler cast the deciding vote this week to approve several spot bitcoin exchange-traded funds (ETFs). The move grants the top cryptocurrency a level of Wall Street legitimacy that Gensler has long opposed. So why the sudden change of heart?
- Trading volume on newly approved spot Bitcoin ETFs surged past $5 billion in the first two days after launch
- SEC Chair Gary Gensler remains highly skeptical of crypto, warning that bitcoin is a “highly speculative, volatile asset” used primarily for “illicit activity”
- The Grayscale court decision in August 2023 was a key factor that led the SEC to approve the Bitcoin ETFs
- Major firms like Vanguard, Merrill Lynch, Edward Jones and Northwestern Mutual are not yet offering the new Bitcoin ETFs to clients
- Gensler’s legacy as a “crypto cop” is now in question after he cast the deciding vote to approve spot Bitcoin ETFs
Despite warnings of bitcoin’s volatility, manipulability and use in illicit transactions, trading in the newly approved ETFs has exploded. Volume surged past $5 billion in the first two days, suggesting significant pent-up demand from investors.
Yet Gensler remains as skeptical as ever. In a CNBC interview after the vote, he called bitcoin “a highly speculative, volatile asset” used primarily by criminals. His anti-crypto rhetoric indicates that political pressure or a court decision forced his hand.
— Bitcoin Magazine (@BitcoinMagazine) January 12, 2024
That pressure came from Grayscale, whose Bitcoin Trust (GBTC) accounted for nearly half the recent ETF trading volume. After the SEC rejected Grayscale’s spot bitcoin ETF application last June, the company sued the agency.
When a federal judge ruled that the SEC must better justify the discrepancies between its treatment of bitcoin spot and futures ETFs, Grayscale had the upper hand. Gensler admitted that the decision “changed” the calculus around approval.
By caving to the courts, Gensler’s legacy as a “crypto cop” now lies in tatters. Appointing a lawyer with a history of crypto skepticism to lead the SEC, President Biden hoped Gensler would bring order to the “Wild West” of digital assets.
Far from validating SEC criticisms about manipulation and volatility, the successful launch of these ETFs proves that institutional and retail investors alike see immense value in crypto technology. The genie cannot be put back in the bottle – blockchain-based digital assets are here to stay. And despite bureaucratic resistance, capitalist free markets will continue funding blockchain innovation until its benefits permeate global finance.
True crypto regulation requires nuance, not scaremongering and obstructionism. Rather than stifle American innovation to chase an impossible dream of full central control, policymakers should promote freedom while enacting sensible safeguards against fraud. The SEC would be wise to shift gears from attacking crypto businesses to nurturing communication and collaboration with them.
Because while regulators may slow its pace at times, nothing can stop the crypto revolution now. The flood of ETF investment despite Chairman Gensler’s objections shows the world has already voted: the economic future will be decentralized.