Running bitcoin, 2024
SEC approves 11 spot bitcoin ETFs in the US
Today, the SEC approved the listing and trading of 11 spot bitcoin ETFs in the US after a decade of denials (the Winklevoss brothers filed for the very first spot bitcoin ETF in 2013 when the price per BTC was $100).
January 11, 2024 is also the 15th anniversary of Hal Finney’s iconic “running bitcoin” tweet. Hal was the first person after Satoshi Nakamoto to download and run the bitcoin software, and the recipient of 10 BTC from Satoshi in the first transaction on the bitcoin network.
The agency was dragged kicking and screaming into the approval after the federal court of appeals in the DC Circuit rebuked the SEC in a unanimous ruling last year that the SEC's denial of the spot bitcoin ETF was "arbitrary and capricious".
Common objections against crypto
These are not the first spot ETFs for bitcoin (Canada approved the first one in early 2021). But in my opinion, the main milestone these approvals achieve is the definitive shift of the Overton window around crypto and its acceptability in polite company.
For the longest time, the mainstream and acceptable discourse around crypto typically ended up in three (self-contradictory) objections:
It's too libertarian. Governments desire control and would not tolerate ownership of an asset that they do not control, and therefore governments would ban it.
It’s a useless asset/technology/ponzi scheme.
It’s the preferred and effective tool used by criminals conducting illicit activities, like money laundering, sanctions evasion and terrorist financing. Typically an argument made in the same breath as #2.
On point #1, those views were not entirely wrong. Governments, particularly those of countries with weak property rights and strict limits on individual economic freedoms in the form of capital controls, have repeatedly attempted to restrict and discourage their citizens’ access to crypto. Ironically, crypto thrives in those places.
Points #2 and #3 are usually made by people who read and parrot the headlines in the media without actually using or understanding the technology. This isn’t new to this particular technology. Some people held the view that the internet was a silly invention when you had TV or radio (1995).
Or were skeptical that credit cards were a useful means of payment for day-to-day transactions (1993).
Crypto is technology, and technology development is value neutral and inevitable.
Criminals commit crimes, using the latest tools available at their disposal:
At the dawn of the 19th century, criminals used motor cars as getaway vehicles after bank robberies.
Criminals commit crimes in the financial markets - see renewed allegations that terrorist affiliates shorted financial assets ahead of the Hamas attacks on Israel, reminiscent of similar allegations around unusual options activity prior to the 9/11 attacks.
Of course, criminals regularly use telephones and the internet to commit crimes.
Proceeds of criminal activity and fraud are laundered through familiar fintech services like Venmo, PayPal, Zelle, and CashApp. It’s not limited to fintech - large financial institutions frequently pay large fines for facilitating money laundering by drug cartels and sanctioned persons and states.
Credit card fraud costs upward of $30 billion in losses per year in the US alone.
Getting there
Regardless of the path it took to get to the approvals today, it is a testament to the strength and robustness of the US legal system that a government agency would be forced into approving something that the government of the day is politically opposed to as a result of a judicial rebuke.
As Commissioner Peirce concludes in her statement: “I am not celebrating bitcoin or bitcoin-related products; what one regulator thinks about bitcoin is irrelevant. I am celebrating the right of American investors to express their thoughts on bitcoin by buying and selling spot bitcoin ETPs.”
Sure, new channels for capital inflow into the digital asset ecosystem are worth celebrating. I expect we’ll see upwards of $5 billion of inflows into the US bitcoin ETF products by the end of 2024. And by the same logic and standards applied by the SEC in these approvals, the spot ether ETF approvals may soon follow.
Prices of crypto assets increasing over time is nice and contributes to more innovation around the technology. But crypto assets never needed these types of products for the number to go up anyway (the price per bitcoin in USD terms is up 470x in the last decade).
The most important development to celebrate is that the deepest and most vibrant economy in the world has now provided an easy way for more people, whether directly through their 401k retirement accounts or indirectly through their pension plans, to get access to a new type of technology asset. This recent embrace of crypto assets by the largest financial institutions in the US marks a new chapter for innovation around crypto, blockchains, and digital assets more broadly - hopefully one that sounds a bit less taboo so there are fewer obstacles in the way of would-be entrepreneurs and innovators who want to build something new.