It happened with little fanfare, but a handful of official documents signed in Washington, D.C., in early January set off a tidal wave of change that was years in the making.
After a false start caused by a compromised social media account, Securities and Exchange Commission (SEC) Chairman Gary Gensler did what cryptocurrency advocates and fund manager heavyweights had long campaigned for — Spot By giving regulatory approval to Bitcoin Exchange Traded Funds (ETFs). .
It marked an important day in digital currency history for advocates and experts, who say it democratized and legalized cryptocurrency, but it hasn't changed their skeptics — including the SEC. who took this opportunity to repeat the warnings. Risks of cryptocurrency investment
It's a new dawn in the world of investment and finance in America - and while Australia still has some hurdles to overcome before it follows suit, experts say it's only months away.
The allure of Bitcoin, crypto, and ETFs
To understand the importance of what might otherwise seem like a routine procedure, consider the history of Bitcoin and cryptocurrencies.
Bitcoin was invented in 2008 by an unknown creator named Satoshi Nakamoto to securely store and transfer value over the Internet without the need for a middleman (such as a bank) to validate transactions. was made as a method of
In the years since, countless other digital currencies have launched, but bitcoin remains the world's largest cryptocurrency - and the more popular it becomes, the more attention it attracts from investors.
Understanding Bitcoin and Cryptocurrency
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However, a major problem for investors is that the process of buying and storing Bitcoin is complicated and high-maintenance, and as a result, it is difficult for people to invest.
Professional mainstream investors were allowed to bet on the price of bitcoin in late 2017, after two Chicago exchange operators began trading bitcoin futures.
As of November 2021, Bitcoin reached its all-time high of $US68,789 ($104,711) and, although its price fluctuates widely, is currently valued at around $US41,150 ($62,630). .
The proposition of Bitcoin ETFs is similar to products that track the performance of a stock exchange such as the ASX rather than buying individual company shares.
"It's like buying individual flowers, whereas now the ETF gives you the bouquet," explains Chris Braicki, founder and chief executive of StockSpot, a digital investment advisor that specializes in share market ETFs.
In other words, asset managers want to be able to offer their clients an investment product that tracks the value of bitcoin, without clients having to go through the complicated rigmarole of buying and storing it.
All that remained was for regulators to give their stamp of approval, but it would take years to convince them.
The effort to get spot bitcoin ETFs listed on US financial markets has been ongoing since 2013, when a number of asset managers first started applying.
Each time, the SEC rejected them over concerns that the investment products would be prone to market manipulation, or that they would not adequately protect investors as required.
Still, asset managers will continue to apply, and the SEC will continue to reject them — until one applicant knocks the regulator to court in 2022.
Grayscale Investments, an investment services company that specializes in digital currency, filed with the SEC in 2022 to convert its publicly listed Grayscale Bitcoin Trust into an ETF.
It was denied, but instead of reapplying, Grayscale sued the SEC, arguing that pre-approved oversight arrangements for bitcoin futures ETFs would be satisfactory, and that bitcoin exchanges would offer better protection and regulation than the ones Americans were investing in—Like the now-bankrupt FTX.
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