SEC's Peirce Criticizes Agency for Spot Bitcoin ETF Mania

SEC Commissioner Hester M. Peirce said that the record-breaking starts of spot bitcoin ETFs proved investors wanted the funds, but added there was a “real problem” about how the agency handled the approvals.

Peirce noted her criticism in response to an etf.com question during a wide-ranging panel discussion at Brooklyn Law School, saying that the SEC had contributed heavily to spot bitcoin mania by applying the wrong standards as it evaluated the proposed funds and was overly negative. 

“The launch broke records— we all watched that happen,” she said. “But I think there was a real problem about the way we went about this. I think we used a different standard than we use for similar products, and instead we kept saying no, no, no.”

The SEC approved the first 10 spot bitcoin ETFs on Jan. 10 after a decade of regulatory back-and-forth with issuers and multiple denials. The funds have accumulated about $60 billion in assets since their start a day later with BlackRock's iShares Bitcoin Trust (IBIT) generating $10 billion in AUM faster than any ETF in history. IBIT currently has $17 billion in AUM, according to research from the research arm of cryptocurrecy exchange BitMex. 

In the days and months and days leading up to the SEC approvals, cryptocurrency investors and analysts closely tracked the communications between the agency and issuers—an unusual scenario for ETF approvals. 

While the spectacle underscored the interest in the funds, it also contributed to false rumors that moved markets. A hack to the SEC’s Twitter/X that resulted in a confusing post shortly before the eventual approvals sent analysts, journalists and investors scrambling for hours. 

“We built up so much attention around it, and then you had the [tech glitch] problems around the launch,” Peirce said. “When we built up that attention, it is just not a healthy way for us to be improving things.”

Peirce, a Republican who was sworn into her position in 2018, has been vocal in her view that the SEC should have approved the spot bitcoin ETFs years earlier.

Crypto Regulation

Although Peirce noted that the SEC should engage more with those in the cryptocurrency industry, she emphasized that she wasn’t necessarily a proponent of bitcoin or any digital asset product.

“It is important to underscore the SEC greenlighting these [ETFs] is not the seal of approval,” she said. “The SEC is not in the business of telling you what to put in your portfolio, we’re in the business of getting the disclosure right to make sure people can understand and make their own decision.”

She declined to comment on the current spot Ethereum ETF filings which are under SEC review now and whether her view about whether Ethereum is a commodity or a security. 

Contact Lucy Brewster at [email protected].