What does it mean for Bitcoin spot ETF to be approved for sale?

Source: Xiao Sa lawyer

On January 10, 2024 local time, the U.S. Securities and Exchange Commission (hereinafter referred to as "SEC" ”) approved the first batch of ETFs (Exchange Traded Funds, that is, exchange-traded open-end index funds) with the crypto asset Bitcoin as part of the underlying assets in history, and allowed these ETFs to be officially listed for public trading on Thursday.

It must be said that Bitcoin has risen sharply since the end of 2023. Part of the reason comes from the expectations and optimism of the entire crypto market and capital market for the US SEC’s approval of ETF. So, today the Sajie team will analyze the future regulatory trends of the crypto asset market in view of this landmark event in the history of crypto assets.

01 BitcoinETF was approved for listing, why did the SEC compromise?

According to the public list, we can see that the 11 ETFs approved this time are: Grayscale, Bitwise, Hashdex, iShares, Valkyrie, Ark 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity , Franklin, all have strong backgrounds, including well-established investment institutions such as Invesco, Fidelity and global asset management giant BlackRock, as well as new entrants such as Grayscale and Ark. It is not difficult to see that as the crypto asset market gradually develops and matures and the public's awareness of virtual assets increases, it has become an object worthy of the attention of the traditional capital market.

The approval of the Bitcoin ETF is a milestone in the two-way journey between traditional finance and crypto-assets. It is of great significance to virtual currencies: this marks that as a A product that challenges the traditional financial order and game rules, Bitcoin has won the "compromise" of regulatory agencies for the first time, and this kind of compromise will happen countless times as long as it happens once.

In fact, the SEC’s compromise was hard-won. Grayscale Investment had previously applied to the SEC to convert its Grayscale Bitcoin Trust (GBTC) into an ETF but was rejected by the SEC. Grayscale believed that the decision did not comply with the provisions of U.S. securities-related laws and took the lawsuit all the way to the federal appeals court. In the end, the judge made a ruling that the SEC's rejection of Grayscale-related applications lacked sufficient reasons. This made the SEC waver in its stance on reviewing Bitcoin ETFs and approved the first batch of Bitcoin ETF applications.

02 What does the listing of Bitcoin ETF mean for the crypto market?

Some partners believe that the listing of Bitcoin ETF seems to mean that regulatory agencies have begun to "soften" their attitude towards many crypto-assets, including virtual currencies, and some people even refer to this incident Regarded as a "game changer for cryptocurrencies", he believes that the crypto world has begun to win the tug-of-war with traditional financial regulation. Subsequent crypto world specialties such as RWA and DAO that are highly compatible with the existing legal system and regulatory system will also It can be "compliant" like Bitcoin ETF.

However, the Sajie team believes that the approval of Bitcoin ETF is only the beginning. It does not mean that the encryption world will achieve success in a short time (or even in recent years). The breakthrough progress is mainly based on the following reasons:

(1) ETF is just a financial instrument and will not change the nature of the cryptocurrency itself

As a type of exchange-traded open-end index fund, ETF is also called "index stock" in China. It is essentially a financial instrument and investment tool. It creates a portfolio of securities based on changes in the index by copying the underlying index. , so that investors only need to purchase one financial product to trade a basket of securities. Generally speaking, ETFs have three major characteristics. One is that they can be bought and sold freely like stocks; the other is that they track specific securities indexes; and the third is that they can freely make physical redemptions and cash redemptions at any time.

Therefore, Bitcoin ETF is not equal to Bitcoin itself, and it will not have any impact on the nature of Bitcoin. You can basically regard it as a derivative of Bitcoin. Both Related but completely different. At present, countries around the world generally regard Bitcoin and other cryptocurrencies as a special financial product or a special virtual asset, and have successively introduced regulatory systems for Bitcoin. The approval of the Bitcoin ETF does not affect the direct supervision of various countries. Established norms for holding, using and trading cryptocurrencies.

(2) ETFs cannot effectively regulate the risks of cryptocurrency investment

As mentioned above, the impact and relationship between ETFs and cryptocurrency is With one-way transmission, ETFs cannot reversely affect cryptocurrencies, and naturally they cannot effectively regulate the risks of cryptocurrencies. In other words, the value basis of cryptocurrencies such as Bitcoin and Ethereum is "based on the consensus of participants in the crypto world" and the basic logic remains unchanged. Therefore, if many virtual currencies should rise or fall, ETFs can only follow suit. This does not change the fact that cryptocurrency is an extremely risky investment.

(3) Bitcoin itself has special characteristics that cannot be replaced by other cryptocurrencies

Bitcoin is one of the crypto assets created based on blockchain technology. "The originator" has a special "status in the world" and a value basis that is different from other virtual currencies. The liquidity and value of most crypto assets largely depend on the consensus of participants and the community, and Bitcoin has a very special status in the hearts of most participants in the crypto world. Even in the understanding of ordinary people outside the circle, Bitcoin is even equated with big concepts such as "encrypted assets" and "cryptocurrency", which shows the high popularity of Bitcoin.

Based on this, Bitcoin has a special status in various countries’ regulations on cryptocurrency. For example, in the European Union's regulatory norms for crypto assets and regulatory rules for ICO activities, although Bitcoin is not recognized as a "legal currency", it is recognized as a virtual currency that can be converted into two-way currency with legal currency. Can be used to obtain goods and services in the real economy and has value.

Therefore, Bitcoin itself has special characteristics that other cryptocurrencies cannot bring. It is very difficult for other cryptoassets to issue ETFs compared to Bitcoin. At present, ETH is more likely to be used as a Bitcoin After the currency, there is an ETF underlying asset, but other types of crypto assets have greater difficulties.

03 What does Bitcoin ETF mean to ordinary people?

A question that many friends are concerned about is that if Bitcoin ETFs can be publicly traded, can residents in mainland my country buy ETFs? Does the related behavior of buying and selling Bitcoin ETFs violate my country’s laws and regulations on crypto assets?

The Sajie team believes that Bitcoin ETF, as a kind of crypto asset derivatives, is not subject to the requirements of the People's Bank of China, the Central Cyberspace Administration, the Supreme People's Court, etc. There are disputes over the scope of regulations such as the Notice on Speculation Risks (hereinafter referred to as the "9.24 Notice"). However, one person said that the Sajie team believes that based on the third provision of Article 1 of the 9.24 Notice, "overseas virtual currency exchanges provide services to our country through the Internet. The provision of services by domestic residents is also an illegal financial activity. For domestic staff of relevant overseas virtual currency exchanges, as well as legal persons who know or should know that they are engaged in virtual currency-related businesses, they still provide marketing promotion, payment settlement, technical support and other services. , unincorporated organizations and natural persons shall be held accountable in accordance with the law.” U.S. Bitcoin ETF dealers cannot sell related financial products to Chinese citizens, and residents of mainland my country are not allowed to directly use VPN and other tools to directly purchase related financial products in the mainland.

However, can residents of mainland my country buy and sell U.S. Bitcoin ETFs if they go abroad physically? First of all, the sale of U.S. Bitcoin ETFs does not impose restrictions on investors. As long as it complies with the relevant provisions of U.S. law, anyone can invest in Bitcoin ETFs. However, related investments face compliance reviews such as capital entry and exit. Sister Sa The team specifically reminds readers to be cautious about such investments. In Hong Kong, the Hong Kong Securities Regulatory Commission has clearly stipulated that the related sales of crypto assets must comply with the regulations of various countries and jurisdictions. Chinese citizens are unable to purchase crypto asset ETFs sold in Hong Kong (in the future).

04 Written in Finally

Bitcoin ETF is an organic combination between old and new things. We are currently unable to make any predictions about the future development of this investment product, but since Grayscale obtained the federal Since the favorable ruling of the Court of Appeal, Bitcoin has begun to rise. The approval of the Bitcoin ETF is indeed a shot in the arm for the crypto market in the context of the economic downturn. However, the fact that cryptocurrencies have not yet entered the mainstream has not changed. Sajie Team It is recommended that partners keep a clear head at all times and never make investment decisions haphazardly.