Gary Gensler's Reluctant Acknowledgment: No Approval or Endorsement for Bitcoin ETFs

SEC Chair Gary Gensler has recently acknowledged the regulatory body's setback in court, specifically in relation to the rejection of Grayscale's spot bitcoin exchange-traded fund (ETF). This setback has compelled the SEC to give the green light to approximately twelve similar proposals. In a statement released following these decisions, Gensler underscored that these approvals represent what is considered the "most sustainable path forward," constituting a noteworthy moment for both the cryptocurrency industry and investors.

Nevertheless, Gensler was keen to clarify that the SEC's approval of these ETFs should not be misinterpreted as an endorsement or show of support for bitcoin or any other digital asset. He urged investors to exercise caution, highlighting the diverse risks associated with bitcoin. Gensler characterized bitcoin as a speculative and volatile asset, frequently connected to illicit activities such as ransomware, money laundering, sanction evasion, and terrorist financing.

Crucially, Gensler aimed to dispel any assumptions that the approval of these ETFs signaled a broader shift in the SEC's position on crypto assets. He explicitly stated that granting approval to these ETFs does not imply the commission's readiness to endorse listing standards for crypto asset securities. Furthermore, it does not convey the SEC's perspective on the regulatory status of other crypto assets under federal securities laws or the compliance status of specific market participants.

Gensler reiterated his stance that bitcoin is the only digital asset he recognizes as not falling under the SEC's jurisdiction as a security. He argued that the majority of other tokens meet the legal definition of securities and, consequently, fall within the regulatory scope of the SEC.

A Departure from Consensus: Crenshaw's Concerns About the Approved ETFs

Notably, Commissioner Caroline Crenshaw dissented from the approvals, expressing concerns that the decisions could jeopardize investor protection and deviate from the SEC's statutory and foundational mandates, she said in a statement. In contrast, Commissioner Hester Peirce, a consistent advocate for the crypto industry, lauded the approvals as the resolution of an unnecessary yet significant saga. She emphasized that the only substantial change since the previous rejection of a similar application was a judicial rebuke, alluding to the SEC's loss against Grayscale in the U.S. Court of Appeals for the District of Columbia.

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