Grayscale Urges SEC Approval for Grayscale Bitcoin Trust Conversion
Grayscale Investments is pushing the Securities and Exchange Commission (SEC) to grant approval for converting its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF. The company warns that the SEC’s delay in approving the conversion is harming investors unjustifiably. In a letter sent to the SEC on September 5, Grayscale’s lawyers argue that there are no grounds for treating GBTC differently from Bitcoin futures ETFs, which the SEC already permits. Grayscale emphasizes that the delay in granting approval is causing competitive harm to investors and spot Bitcoin product issuers like themselves. They believe that investors and spot Bitcoin product issuers deserve a level playing field as soon as possible.
Landmark Legal Win for Grayscale
In a significant victory for Grayscale against the SEC, a court criticized the regulator’s decision to approve futures ETFs but not spot Bitcoin investment products. The court labeled the decision as “arbitrary and capricious.” Grayscale successfully argued that spot Bitcoin ETFs are materially similar to Bitcoin futures exchange-traded products that have already received approval from the SEC. This legal triumph sparked a rally in cryptocurrency assets and is seen as a breakthrough for an industry struggling against the SEC’s regulation-by-enforcement approach.
Implications of Spot Bitcoin ETF Approval
The approval of spot Bitcoin ETFs, particularly those backed by major investment firms like BlackRock and Fidelity, would be a significant milestone for the crypto industry. It is expected to drive increased demand for Bitcoin, with New York Digital Investment Group predicting an influx of $30 billion. Seven firms, including BlackRock and Fidelity, have submitted applications to the SEC for spot Bitcoin ETFs. However, the SEC has once again delayed a decision on these applications, causing turmoil in the crypto market. While the SEC has extended the period for public feedback on the applications, the final deadlines for a decision are expected to be around mid-March 2024.
Harm Caused by SEC’s Delay
Grayscale’s lawyers highlight the harm caused by the SEC’s delay in approving the conversion of GBTC into a spot Bitcoin ETF. They point out that on the day of Grayscale’s legal victory over the SEC, a Bitcoin futures exchange-traded product experienced a significant increase in net inflows. It received over 800% more inflows than its average daily inflow during the previous 30 days. Grayscale’s lawyers argue that it is reasonable to assume that the Trust would have attracted a substantial portion of this investment capital if it had been operating as an ETP on that day. The delay in approval has prevented the Trust from capitalizing on this opportunity.
Hot Take
The SEC’s delay in approving the conversion of Grayscale Bitcoin Trust into a spot Bitcoin ETF is causing unjustified harm to investors and hindering the growth of the crypto industry. The approval of spot Bitcoin ETFs, backed by prominent investment firms, has the potential to revolutionize the industry and attract significant new demand for Bitcoin. The SEC should expedite the approval process to ensure a fair playing field for investors and allow the crypto industry to thrive.
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