- Grayscale Investments is appealing against the repeated rejections of the SEC to convert its flagship Bitcoin
(BTC) fund into an ETF.
- The SEC saw an increase in spot Bitcoin ETF applications in June, triggered by the first application from BlackRock, one of the world’s largest asset managers.
- The SEC has been hesitant to give the green light to a spot Bitcoin ETF for over a decade, citing concerns of potential fraud and market manipulation.
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Grayscale, which is fighting against the SEC to convert its Bitcoin Trust product into a spot Bitcoin ETF, wants the SEC to demonstrate a fair approach.
Grayscale Calls on the SEC Regarding Bitcoin
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Craig Salm, the General Counsel of Grayscale, shared a blog post on July 27th, emphasizing that the SEC should avoid picking winners and losers among ETF applicants. Grayscale Bitcoin Trust (GBTC), with assets over $18 billion, provides investors exposure to the leading cryptocurrency. The company is appealing against the SEC’s repeated rejections to convert its flagship Bitcoin (BTC) fund into an ETF.
A spot Bitcoin ETF allows institutional investors to be exposed to Bitcoin without the need to directly hold the digital asset. This approval is considered significant within the crypto community and would likely lead to wider adoption of Bitcoin and legitimization of crypto assets as a recognized asset class.
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The SEC saw an increase in spot Bitcoin ETF applications in June, triggered by the first application from BlackRock, one of the world’s largest asset managers. Other companies such as Fidelity, WisdomTree, and Invesco quickly followed suit, turning the approval process into a competitive race.
However, the SEC has been hesitant to give the green light to a spot Bitcoin ETF for over a decade, citing concerns of potential fraud and market manipulation. In particular, the initial applications from BlackRock and Fidelity were deemed insufficient due to inadequate surveillance sharing agreements for market monitoring.
Unlike futures-based ETFs that derive their prices from commodity exchange contracts such as the Chicago Mercantile Exchange, spot-based ETFs provide direct exposure to Bitcoin’s price movements.
Nevertheless, companies like BlackRock and Fidelity have taken necessary steps to address the concerns of the regulatory agency in their applications. For example, BlackRock has stated that it is in the final stages of a surveillance agreement with Coinbase, a major cryptocurrency exchange.
The proposed agreement includes Coinbase providing order and transaction data and cooperating with Nasdaq in investigating potential market manipulation. The SEC has already approved various futures-based Bitcoin ETFs, including Grayscale’s.
Grayscale Demands Fair Treatment
Salm, the General Counsel of Grayscale, reiterated that spot and futures Bitcoin markets are interconnected and that existing surveillance agreements for products regulated by the Commodity Futures Trading Commission must meet regulatory requirements.
In its ongoing case against the SEC, Grayscale found support from the presiding judge who questioned the agency’s reluctance to approve a spot ETF and implied potential arbitrary decision-making. Even if the SEC triggers the approval of a spot ETF through a court order or a change in its internal stance, Salm emphasized that it should be applied fairly to all investors and issuers.
Grayscale demonstrated its willingness to collaborate with regulators for its initial spot ETF application, which was first filed in 2016. Salm reiterated the company’s commitment to converting GBTC into an ETF.