SEC’s Gensler warns of crypto risks amid Bitcoin ETF buzz

Gary Gensler, Chair of the U.S. Securities and Exchange Commission. Image: Evelyn Hockstein-Pool via Getty Images

Gary Gensler, chair of the U.S. Securities and Exchange Commission (SEC), cautioned investors about the high risks and volatility of cryptocurrency assets on Monday in a post on X (formerly Twitter), as the Web3 industry anticipates the SEC’s decision on several spot Bitcoin exchange-traded fund (ETF) applications.

“Investments in crypto assets also can be exceptionally risky & are often volatile. A number of major platforms & crypto assets have become insolvent and/or lost value. Investments in crypto assets continue to be subject to significant risk,” Gensler said.

The SEC chief’s warning did not specifically reference the proposed ETFs but coincided with a series of amended Form S-1 filings, also known as the initial registration forms for new securities. 

The agency is expected to respond to the applications, which include submissions from industry heavyweights such as BlackRock, Ark Invest/21Shares, and Fidelity, by January 10, with the potential for a landmark approval that could introduce the first spot Bitcoin ETF in the United States.

The SEC’s potential approval of a spot Bitcoin ETF has been long-awaited and could signal a new era of mainstream investment opportunities for digital assets. Such a move would not only provide a regulated investment vehicle for Bitcoin but could also pave the way for further integration of cryptocurrencies into traditional financial systems.

The amended S-1 filings by various asset managers are seen as a final step before potential approval, with some firms even slashing fees to attract investors to their prospective ETF products. For instance, ARK Invest and 21Shares have proposed waiving their 0.25% fee for the first six months for the initial US$1 billion in assets under management, while BlackRock has set a competitive ongoing fee of 0.3%.

While the commission has the option to deny the applications, recent legal developments, such as a federal judge’s order for the SEC to reconsider a previously denied spot Bitcoin ETF application from Grayscale Investments, the operator of the Grayscale Bitcoin Trust, the world’s largest Bitcoin fund, suggest that the regulator’s rationale for any decision will be closely examined.

The potential approval of a spot Bitcoin ETF in the United States would follow in the footsteps of its neighbor, Canada, which permitted the listing of such products on exchanges starting in 2021.