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SEC approves new bitcoin fund, paving the way for more Americans to buy crypto

A MARTÍNEZ, HOST:

Cryptocurrency has attracted many scams and grifters but has also now won some approval from regulators.

STEVE INSKEEP, HOST:

Yeah, the U.S. government just gave the green light to a bitcoin ETF. ETF - that's a new kind of cryptocurrency investment fund that debuts today.

MARTÍNEZ: NPR's David Gura joins us now. David, bitcoin ETFs - the ETF stands for exchange-traded funds. What is it?

DAVID GURA, BYLINE: Yeah. So basically, this is a way for people to invest in bitcoin - of course, the world's oldest and most popular cryptocurrency - without having to own any actual bitcoins. Stay with me here, A. Exchange-traded funds, or ETFs, are very popular. This is a $7 trillion industry. A lot of people have them in their portfolios. And in general, what they do, A, is track common investments like stocks and bonds. But the ones that just got clearance, these new ETFs, are going to track the price of bitcoin. The SEC just approved about a dozen of them, and they start trading on U.S. stock markets today.

Now, people in the crypto industry had been hoping for this for years. There was a lot of buildup. In fact, in the last year, bitcoin's price shot up more than 150%. And there were more twists and turns this week. One day before the decision, someone caused a real frenzy by hacking into the SEC's account on the social media site X, formerly known as Twitter. That, by the way, now is something the FBI is looking into.

MARTÍNEZ: But what's behind the excitement over this new kind of crypto investment?

GURA: The true believers, along with some big money managers like BlackRock and Fidelity, they say this is going to be a way to get more people into crypto. Of course, buying bitcoin has gotten easier in recent years, for better or worse, but it still takes a few steps to do it. You have to use a specialized exchange. It's kind of complicated. Bryan Armour is an analyst with Morningstar who follows the world of ETFs, and he told me these new ETFs will make the barrier to entry much lower.

BRYAN ARMOUR: So there's no signing up with a crypto exchange, managing a wallet, God forbid losing your private key to whatever bitcoin you own.

GURA: Companies see a lot of opportunity here, A, but regulators have been wary of this.

MARTÍNEZ: So about those regulators - why give the green light now?

GURA: Well, they were kind of left with no choice. One crypto company took them to court because they felt the SEC didn't give them a fair shake, and it won. Now, Sarit Markovich is a professor at the Kellogg School of Business at Northwestern. And she says what's really valuable here is the legal clarity that comes from what the SEC has done.

SARIT MARKOVICH: Here we're finally at the point where the regulator is willing to kind of, like, give us clear guidance in terms of what's legal and what's not legal.

GURA: At least with these specific bitcoin ETFs. It's evident, though, A, from this 20-something-page decision and from a statement from the head of the SEC that regulators did this, they made this decision with some reluctance.

MARTÍNEZ: Why were they reluctant?

GURA: Well, the chair of the SEC is Gary Gensler. And he has spent most of his tenure at that agency trying to rein in crypto. He famously said early on, it's like the Wild West. And I'll remind everyone, bitcoin and most cryptocurrencies are very volatile. Prices can move up and down a lot in a single day. And as you said, there's been a lot of unfavorable news about crypto, to say the least.

The SEC still has major lawsuits pending against Sam Bankman-Fried - that, of course, being the disgraced crypto mogul who was convicted just a few months ago of orchestrating one of the largest financial frauds in history. He's scheduled to be sentenced in March. The SEC is also suing Binance, whose founder is also looking at prison time.

So Gary Gensler - still very concerned about how risky crypto is. And, A, he emphasized that. While the SEC is giving the go-ahead to these specific funds, he and his colleagues are by no means endorsing bitcoin itself or any other cryptocurrency.

MARTÍNEZ: All right. That's NPR's David Gura. David, thanks.

GURA: Thanks, A.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

A Martínez
A Martínez is one of the hosts of Morning Edition and Up First. He came to NPR in 2021 and is based out of NPR West.
David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.