SEC Wasted a Decade Rejecting Bitcoin ETFs

The approval of spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) on Wednesday was as anticipated. However, SEC Commissioner Hester Pierce, affectionately known as “Crypto Mom” among enthusiasts for her longstanding support of cryptocurrencies, did not mince words in expressing the toll the prolonged waiting period took on the agency, investors, and the cryptocurrency industry.

In her statement following SEC Chair Gary Gensler’s more reluctant acknowledgment of the long-awaited Bitcoin ETF approval, Pierce characterized the event as the conclusion of an unnecessary yet significant saga. Emphasizing that the initial application for a spot Bitcoin ETF had been filed over a decade ago in the United States, she highlighted the recurring question regarding the necessity of a spot Bitcoin exchange-traded product (ETP) throughout her six years with the agency.

Commissioner Hester Peirce’s Perspective on Spot Bitcoin ETF

Pierce questioned the perplexing logic behind the series of denials, stating that predicting approval timelines for spot Bitcoin ETPs was challenging due to the review process differing significantly from that of comparable ETPs. She underscored the ever-shifting goalposts as the Commission consistently rejected applications with a ‘DENIED’ label. Notably, Pierce pointed out that the SEC’s lack of prior action had compelled retail investors to resort to less efficient methods for gaining Bitcoin exposure in the securities markets.

It's out: https://t.co/tgI9yE4i83

— Hester Peirce (@HesterPeirce) January 10, 2024

Furthermore, she criticized the SEC’s reluctance to admit error, noting that instead of a forthright acknowledgment, the agency provided a weak explanation for its change of heart.

“We wasted a decade of opportunities to fulfill our responsibilities,” Pierce lamented. “Had we applied the standards used for other commodity-based Exchange-Traded Products (ETPs), we could have greenlit these products years ago. However, we held back until a court exposed our reluctance.”

The SEC’s eventual approval of spot Bitcoin ETFs followed a ruling in August by a U.S. Court of Appeals for the D.C. Circuit justice, who mandated that the agency reevaluate an application from crypto firm Grayscale seeking to transform its Bitcoin Trust into a genuine ETF. The justice criticized the SEC for lacking a “coherent explanation” for denying spot Bitcoin ETFs, suggesting that such denials appeared to be “unlawful.”

In his statement, Gensler referred to the court’s decision, acknowledging that while the recent Bitcoin ETF applications resembled previous ones, the “circumstances, however, have changed.” He went on to state that, considering these circumstances and the detailed discussions in the approval order, he believed the most sustainable course of action was to approve the listing and trading of these spot Bitcoin ETP shares.

Despite the approval on Wednesday, Pierce asserted that the “order does not undo the many harms created by the disparate treatment of spot Bitcoin products.” She then delved into a list of specific issues she attributes to the SEC’s steadfastly anti-crypto stance over the past decade.