Grayscale’s Standpoint
Grayscale has recently made a case to the Securities and Exchange Commission (SEC) for an equitable approval process for all Bitcoin ETF submissions. The call was conveyed through multiple comment letters shared last week. Craig Salm, Grayscale’s Chief Legal Officer, asserted that the SEC should ensure equitable treatment when it comes to Bitcoin ETFs. He stated, “In its role of providing transparency, the SEC should avoid favoring one application over another.”
The Grayscale Bitcoin Trust (GBTC), which boasts assets worth over $18 billion, provides its investors a chance to engage with Bitcoin. Grayscale has found itself at odds with the SEC in the courts due to consistent refusals to transform its primary Bitcoin fund into a spot Bitcoin ETF.
What is a Spot Bitcoin ETF?
A spot Bitcoin ETF would offer financial institutions an avenue to engage with Bitcoin without directly possessing the cryptocurrency. Such an ETF is viewed by many in the crypto domain as a significant step toward mainstream Bitcoin adoption and recognition of crypto as a viable investment category.
In recent times, the SEC received several Bitcoin ETF applications, notably from BlackRock, one of the globe’s most significant asset management entities. This influx was closely followed by applications from other major firms like Fidelity, WisdomTree, and Invesco, intensifying the competitive landscape.
SEC’s Historical Hesitation
The SEC has historically been cautious, spending over ten years without granting approval to a spot Bitcoin ETF. Their reservations stem from potential risks like fraud and market manipulation. Notably, applications from heavyweights like BlackRock and Fidelity were deemed lacking recently due to inadequate surveillance-sharing protocols for market oversight.
While futures-based ETFs derive their value from contracts trading on commodity exchanges such as the Chicago Mercantile Exchange, spot-based ETFs offer investors a more direct engagement with Bitcoin. In light of the SEC’s concerns, BlackRock revealed its plans to finalize a surveillance pact with the renowned crypto exchange, Coinbase.
The Ongoing Battle
Despite their reservations about spot ETFs, the SEC has greenlit several futures-based Bitcoin ETFs. Grayscale contends in court that this should be considered adequate precedent. Highlighting the company’s position, Salm emphasized the strong connection between Bitcoin’s spot and futures markets. He argued that the current surveillance protocols for products governed by the CFTC should meet the SEC’s requirements.
During a March hearing concerning Grayscale’s lawsuit against the SEC, the presiding judge seemed to side with Grayscale, questioning the SEC’s seeming inconsistency in its decisions. Salm expressed that regardless of the SEC’s final decision being influenced by court directives or a shift in their stance, it ought to ensure equity for all stakeholders.
Grayscale’s Commitment
Grayscale has indicated its readiness to collaborate with regulatory authorities to attain approval for a spot ETF. Their journey began in 2016 with the initial attempt to transition GBTC into an ETF. Echoing the company’s unwavering commitment, Salm declared, “We are prepared to undertake any requisite measures to evolve GBTC into an ETF.”
