Gensler Warns Investment Community – A Positive Sign? 

As the investment community eagerly anticipates the U.S. Securities and Exchange Commission’s (SEC) decision on several spot Bitcoin ETF applications, SEC Chair Gary Gensler has issued a cautionary message to crypto investors.

In a January 8 post on the social media platform X (formerly known as Twitter), Gensler didn’t directly address the spot Bitcoin ETFs but warned investors about the potential risks associated with crypto investments. He emphasized that some asset managers offering crypto investment vehicles might not be in compliance with federal securities laws. Gensler also highlighted the exceptional risks and volatility often associated with crypto assets, warning investors about prevalent scams, including fraudulent coin offerings, Ponzi and pyramid schemes, and cases where project promoters abscond with investor funds.

To me, this appears to be a “CYA” post in advance of approving the long-awaited spot BTC ETFs this week. 

Gensler’s comments came shortly after several spot Bitcoin ETF issuers filed amended S-1 applications with the SEC, a critical step towards the possible approval of these investment vehicles in the U.S. Despite the uncertainty of approval at the time of his statement, applications from firms like Valkyrie, WisdomTree, BlackRock, VanEck, Invesco, Galaxy, Grayscale, ARK Invest, 21Shares, Fidelity, Bitwise, and Franklin Templeton are under consideration.

Gensler has faced criticism for the SEC’s longstanding reluctance to approve a spot crypto ETF, despite numerous applications over the years. In contrast, Canadian regulators began allowing the listing of spot Bitcoin ETFs on exchanges in 2021.

The January 8 S-1 filings were a procedural expectation following the 19b-4 filings on January 5. While these filings indicate progress towards potential SEC approval for listing crypto ETFs on U.S. exchanges, they do not ensure approval. The SEC retains the authority to deny these applications, though it would need to cite different reasons than those used previously, especially in light of a federal judge’s August ruling that called the SEC’s denial of a Grayscale spot BTC ETF application “arbitrary and capricious.”