The US Securities and Exchange Commission (SEC) has approved the trading of Bitcoin exchange-traded funds (ETFs), with Australia’s stock exchange set to follow suit by mid-2024.

In what is being lauded as an historic moment for the broader cryptocurrency industry, the securities regulator last week approved a series of proposed rule changes which will effectively allow listing and trading of bitcoin-based products on national securities exchanges.

Investors will now be able to approach the world’s leading cryptocurrency, Bitcoin, via ETFs – which are bought and sold similarly to shares, but typically track the value of a collection of shares instead of a singular company or asset.

Where cryptocurrencies are conventionally traded directly on cryptocurrency exchanges such as Binance, ETFs are traded on securities exchanges such as the New York Stock Exchange (NYSE) or the Australian Securities Exchange (ASX).

The SEC has approved applications from 11 major financial institutions – including Blackrock, Grayscale and Fidelity – to pursue ETF products which track the price of Bitcoin.

In theory, the SEC’s greenlighting of Bitcoin ETFs could signal a wider mainstream adoption of the cryptocurrency, with investors gaining the capability to trade in the asset without having to utilise a cryptocurrency exchange or engage in more complex tools such as crypto wallets and private keys.

According to Ben Weiss, CEO of Chicago-based crypto company CoinFlip, the historic change could see Bitcoin grow in both demand and price as it becomes more accessible to a “new wave of investors”.

“Investors who would not want to hold Bitcoin themselves or navigate a crypto exchange will now be able to have exposure to it, attracting a fresh surge of capital, liquidity, and increased credibility and recognition,” said Weiss.

“An ETF approval opens the floodgates and empowers a new wave of investors, both seasoned and newcomers, to take the leap into digital assets.”

The SEC’s decision is not without criticism however, as members from within the SEC itself have voiced concerns over the cryptocurrency’s volatility and ties to criminal activity such as money laundering and ransomware payments.

“Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing,” said SEC chair Gary Gensler.

“While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin.

“Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto."

SEC commissioner Caroline Crenshaw further dissented from the approved rule changes, deeming them “unsound and ahistorical” before warning the move could lead to a “wayward path that could further sacrifice investor protection.”

In an odd turn of events, the SEC decision came only days after the regulator redacted a prior tweet from social media platform X which prematurely signalled the regulator’s approval had been granted.

While the SEC promptly deleted the tweet – stating its X account had been compromised and used for an unauthorised post – the hoax announcement led to a spike in Bitcoin prices, leaving observers all the more confused when the regulator later confirmed its approval of Bitcoin ETF trading.

Australia to follow suit

According to The Australian Financial Review, Australia is expected to take similar action in the first half of this year, with the ASX set to approve an ETF linked to Bitcoin pricing.

This first domestic ETF is to be launched by Brisbane-based investment management firm, Monochrome Asset Management – while Australian fund manager Betashares is further expected to accelerate existing ETF launch plans following last week’s US announcement.

In an interview with the ABC, Professor at RMIT Blockchain Innovation Lab Chris Berg speculated the approval of Bitcoin ETF trading will extend to other leading cryptocurrencies.

“This is a very powerful product for mainstream adoption, or mainstream investor adoption, of cryptocurrencies,” said Berg.

“It’s starting with Bitcoin, but I expect in coming months or years that there will be other cryptocurrency assets like Ethereum that also will be bought onto ETF status.”