What ETFs mean for bitcoin

This is an audio transcript of the FT News Briefing podcast episode: ‘What ETFs mean for bitcoin’

Marc Filippino
Before we start, I want to let you know about a new podcast from the FT. It’s called The Retreat, and it looks at the dark side of intense meditation. Stick around to hear a trailer at the end of this episode. The Retreat launches January 24th. You can learn more about the podcast in the show notes.

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Good morning from the Financial Times. Today is Thursday, January 11th, and this is your FT News Briefing.

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The US is watching Taiwan’s election very closely. And bitcoin ETFs are ready to hit the market. But . ..

Elaine Moore
. . . the approval will not necessarily mean that the US regulators think these are a very good investment idea for majority of investors.

Marc Filippino
Plus, the Iran-backed militant group known as the Houthis are escalating its attacks on ships in the Red Sea. I’m Marc Filippino, and here’s the news you need to start your day.

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Sources tell the FT that US president Joe Biden will send a high-level delegation to Taiwan after its presidential election on Saturday. The move is pretty unusual and will probably make China very angry. Taiwan’s election has an ominous backdrop to it. The island is under an immense amount of pressure from Beijing to reunify with mainland China. Beijing has suggested it would increase military exercises and economic pressure if Taiwan’s current vice-president, Lai Ching-te, wins. He’s associated with a wing of his party that wants to formalise Taiwan’s independence. 

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The US Securities and Exchange Commission OK’d the first spot bitcoin exchange traded funds yesterday. But this time it was for real. On Tuesday, somebody hacked the SEC’s X account and posted a fake update that the commission had approved a bitcoin ETF. The actual announcement yesterday was a huge moment for cryptocurrency fans. They’re betting that ETFs will bring in new investors to the market. Joining me now is the FT’s Elaine Moore. She’s a technology columnist and the deputy editor of our Lex column. Hey, Elaine.

Elaine Moore
Hi.

Marc Filippino
So Elaine what exactly is a bitcoin ETF and how does it differ from the way that cryptocurrencies are traded now?

Elaine Moore
Bitcoin ETF will be an exchange-traded fund that invests in bitcoin. So at the moment if you want to invest in bitcoin you need to have a digital wallet. You need to go to a specialised trading platform. And we’ve seen the problems that have happened with some of those trading platforms. I’m thinking of FTX. This will make it a lot easier, so you can go to an organisation that maybe you’re familiar with, like BlackRock, and it issues these publicly traded securities. So it gives you exposure to the price movements of bitcoin, but you’re also investing in something that is traded.

Marc Filippino
What’s been the lead-up to the SEC announcement giving approval for an ETF? I mean just give us a little background about the hype and the hurdles here.

Elaine Moore
Well, it’s gone on for a long time, and we have a sort of stand-off between regulators and financial institutions who want to offer these sorts of products. The SEC has been very reluctant and has denied approval, and it sort of came to a head last summer because it denied approval to Greyscale Investments, which wanted to convert a bitcoin trust into a bitcoin ETF. The SEC then lost a court case, and when it lost this court case, that’s when the clock started ticking. And the assumption was if they’ve lost, that means that approval for these bitcoin ETFs is coming.

Marc Filippino
Now, how has the SEC and its chair, Gary Gensler, responded to this?

Elaine Moore
US regulators are really worried about market manipulation. Gensler himself has produced a thread on X, laying out the concerns that he has about crypto investment, warning that it has the possibility of higher risk and volatility for investors. And they’ve sort of been backed into a corner. The approval will not necessarily mean that the SEC, the US regulators, think these are a very good investment idea for majority of investors.

Marc Filippino
Elaine, I think it’s kind of funny. And I’m sure the irony isn’t lost on our listeners that the SEC — the Securities and Exchange Commission, a government body that regulates centralised currency — is getting involved in an entity that is known for being decentralised.

Elaine Moore
Yeah.

Marc Filippino
You know, does the SEC stepping in to approve a bitcoin ETF mark a new phase for crypto itself? And does it take some of the magic out of it?

Elaine Moore
I’m not sure. It depends what side of the crypto line, divide you fall in. If you’re a purist then the idea of cryptocurrencies, of bitcoin, of blockchain is that you don’t need to have institutions. You don’t need to have regulators like the SEC or even governments, because you do away with all of that. So it is . . . You’re right. It is strange in a way, that we’re at this point in time where regulators and financial institutions are stepping in and co-opting something that was actually designed to clear them all out the way in the wake of the financial crisis. I think there’s a sort of compromise going on, maybe on both sides, but if you’re a pragmatic sort of a bitcoin investor, then you assume and you hope that regulation will enlarge the market for this sort of digital asset, and that will potentially mean prices will rise. So depends how you feel about crypto and bitcoin.

Marc Filippino
Elaine Moore is the deputy editor of the FT’s Lex column. Thanks, Elaine.

Elaine Moore
Thank you so much.

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Marc Filippino
For weeks now, shipping has been under threat in the Red Sea. The Houthis, a rebel militant group, has been attacking vessels using drones and missiles. More than a dozen global companies have diverted ships from the Red Sea shipping route since the Houthis’ attacks started. And on Tuesday, they launched their biggest ambush yet. Now, the Houthis have been part of Iran’s response to the Gaza war, and the attacks are raising fears about a broader war in the Middle East.

Kim Ghattas
We are now over a hundred days into the war in Gaza after the horrific attacks of October the 7th, and initially we did not have the Houtis get involved.

Marc Filippino
Kim Ghattas is a distinguished fellow at Columbia University’s Institute of Global Politics and is based in Beirut. She gave us some background on the group.

Kim Ghattas
The Houthis are a rebel movement in Yemen, and over the last eight years, since 2015, the Houtis’ capabilities have really increased tremendously because they were one of Tehran’s loose allies, lesser proxies, and over time they’ve become much better armed, much better financed, not just some local ragtag militia.

Marc Filippino
Ghattas says Iran is feeling pressure to more directly support Palestine.

Kim Ghattas
As time goes by, Iran feels that it cannot remain a credible player in the region where it has always said that it supports the Palestinian cause and not deliver somewhat. And aside from trying to look like it is supporting the Palestinians, it is also, of course, now using this moment of opportunity to push back against US influence in the region. Hence the activities by the Houtis against world trade. Basically, nothing is going through the Suez Canal anymore, and everything is going all the way down around the Cape of Africa. And so that’s 12 per cent of world shipping, which has an impact on world economy.

Marc Filippino
And Iran might be testing its influence in the region under the cover of the Houthis.

Kim Ghattas
What it does tell us, though, is that the Houthis have gone from a two-bit player to a newly elevated ally of the Iranians in what I see as Iran’s negotiations with the Americans about Iran’s place in the region off the back of this war unfolding in Gaza. I think it allows the Iranians, who do not want war on their own territory, to push forward groups like the Houtis to push the international community, to push the west and the US in particular, without much to lose.

Marc Filippino
Kim Ghattas was talking to the FT’s chief political commentator, Gideon Rachman, in this week’s Rachman Review podcast, which is out today. We’ll have a link to that in the show notes.

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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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