Gary Gensler hasn't changed his tone on crypto, even with SEC approval of spot bitcoin ETFs

Securities and Exchange Commission Chair Gary Gensler said Wednesday that the agency he leads was not endorsing bitcoin as it approved spot ETFs that hold the cryptocurrency, but he said changing circumstances had pushed the SEC to finally give the greenlight.

Following a decision made by three judges in a D.C. court over the summer which ruled that the SEC had to re-review a bid from Grayscale Investments for a spot bitcoin ETF, Gensler said it was time to move forward.

"Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares," Gensler said in a statement. 

That doesn't mean Gensler is changing his mind about crypto. The decision to approve spot bitcoin ETFs "should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities."

"Nor does the approval signal anything about the Commission's views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws," Gensler added. "As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws." 

'Investors should remain cautious'

Gensler also noted that the approval does not mean the SEC is endorsing bitcoin. 

"While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin," he said. "Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto."

Spot bitcoin ETFs will offer certain protections, Gensler said, including requiring sponsors to provide full and fair disclosures, and will be on regulated exchanges that have rules designed to prevent fraud and manipulation. 

Commissioners weigh in

"This saga likely would have spanned well beyond a decade were it not for the DC Circuit-ex-machina," said Republican SEC Commissioner Hester Peirce. 

Peirce criticized the agency's past treatment of spot bitcoin ETFs and said it will harm the agency's reputation beyond crypto. Specifically, Peirce lambasted the SEC's "disproportionate attention" on the filings and said it was likely that over the past 10 years "millions of dollars of staff time has gone toward blocking these applications." 

Fellow Republican SEC Commissioner Mark Uyeda said he was concerned about a few aspects of the agency's approval order, including the "invention of a new standard."

"The Commission’s rationale and legal analysis in the Approval Order may serve as precedent for future matters that come before the Commission," Uyeda said. "Even though the Commission is approving the listing applications in this instance, the underlying analytical approach effectively amounts to merit regulation." 

Uyeda and Peirce both supported the approvals. 

Democratic Commissioner Caroline Crenshaw issued a dissent on the approval and said the spot market underlying the spot bitcoin ETFs are fraught with fraud and manipulation without enough oversight.

"I am deeply concerned about today’s actions," Crenshaw said. "I am concerned that these products will flood the markets and land squarely in the retirement accounts of U.S. households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets and will impact the ETPs."

Ultimately, Gensler, Peirce and Uyeda voted to approve the spot bitcoin ETFs in an "order granting accelerated approval." Democratic Commissioner Jaime Lizárraga and Crenshaw voted against. 

(Updated at 5:15 p.m. ET to include other commissioners' comments.)

(Updated at 6:10 p.m. ET to include vote.)