Bitcoin set for ETF approval in US despite confusion after fake tweet

US asset managers remain hopeful the securities regulator will permit the trading of spot bitcoin exchange traded funds (ETFs), even after a fake post on the agency’s social media account saying they had been approved sparked confusion on Tuesday.

The Securities and Exchange Commission (SEC) will decide later on Wednesday whether to approve an application from asset managers Ark Investments and 21Shares to launch a spot bitcoin ETF. More than a dozen bitcoin ETF applications, including from BlackRock, Fidelity and VanEck, are also pending with the agency.

The products would be a game-changer for bitcoin, offering institutional and retail investors exposure to the world’s largest cryptocurrency without directly holding it, and a major boost for a crypto industry beset by a string of scandals.

Several industry executives said earlier this week they expect the SEC will approve the Ark/21Shares product along with many others. They declined to be identified because the discussions are private.

The SEC hasn’t said how it will rule and a spokesperson said the agency cannot comment on applications.

Industry insiders and media outlets were caught off guard on Tuesday evening when an unknown party posted on the SEC’s X account that all the products had been approved, sending executives scrambling to figure out what was happening.

The SEC quickly disavowed and deleted the post, and has said the authorities are investigating the incident. X confirmed late on Tuesday that the SEC’s account was compromised and said it was because of an “unidentified individual” obtaining control of a phone number associated with the agency’s account through a third party.

On Tuesday evening, several of the sources said they didn’t expect the apparent hack to derail the process.

Issuers disclosed their planned ETF fees this week, usually one of the final details nailed down before a launch. At least three firms have filed or were preparing to file requests for SEC approval to launch their products on Thursday, three sources said.

Josh Gilbert, a market analyst at eToro, said Tuesday’s hack had “undoubtedly rattled the bitcoin market”, but that all the signs were that the SEC was poised to approve the products.

Standard Chartered analysts this week said the ETFs could draw $50bn-$100bn this year alone, driving the price of bitcoin as high as $100,000. Other analysts have said inflows will be closer to $55bn over five years.

“It’s a huge positive for the institutionalisation of bitcoin as an asset class,” said Andrew Bond, MD and senior fintech analyst at Rosenblatt Securities. “The ETF approval will further legitimise bitcoin.”

Bitcoin has gained more than 70% in recent months on the expectation ETFs for the asset would be approved. It shot up to about $48,000 on the fake post, before falling to below $45,000 minutes later, and continued to hover around that level late Tuesday.

‘Exceptionally risky’

A green light would mark a U-turn for the SEC, which for a decade rejected bitcoin ETFs on concerns they would be vulnerable to market manipulation. SEC chair Gary Gensler has long said bitcoin isn’t a security and has taken a tough stance on the crypto industry overall, arguing many firms are flouting securities laws.

Hopes the SEC would finally approve bitcoin ETFs surged last year after a federal appeals court ruled the agency was wrong to reject an application from Grayscale Investments to convert its existing Grayscale Bitcoin Trust (GBTC) into an ETF. That ruling forced the agency to re-examine its position.

Issuers have also tried to address the SEC’s market manipulation concerns by arranging for Coinbase Global, the largest US crypto exchange, to work with two of the ETF listing exchanges to monitor the underlying bitcoin market.

Still, some investor advocates have urged the SEC not to bless the products, arguing bitcoin is still too immature. Gensler himself on Monday warned on his personal X account that crypto asset investments “can be exceptionally risky”.

Dennis Kelleher, CEO of Better Markets, said Tuesday’s fake tweet highlighted those risks. “This shows again why bitcoin is the preferred financial product of criminals worldwide,” he said.

Reuters