Grayscale Makes New Push for SEC Approval to Become Bitcoin ETF

Grayscale has made a new attempt to gain approval from the US securities regulator to turn the world’s largest cryptocurrency investment vehicle into a fund traded on major Wall Street exchanges.

The asset manager focused on a legal detail in an attempt to bolster his request to the Securities and Exchange Commission to convert his $40 billion Bitcoin Trust into an exchange-traded fund, according to a letter sent to the regulator.

Grayscale’s move comes as the SEC is deliberating whether to give the go-ahead for U.S. exchange-traded funds to hold bitcoin, rather than cryptocurrency-linked derivatives, for the first time. The regulator said it will make a decision on the application of Grayscale by early July at the latest.

Several rivals have already been reprimanded for their attempts to open similar funds and Grayscale’s bid represents one of the crypto industry’s last hopes of launching such a product in the near future. Only three other similar crypto ETFs are in the queue for approval.

The SEC has pulled back against so-called spot cryptocurrency ETFs over concerns that coins are traded on unregulated platforms, where surveillance is difficult and manipulation is a consistent issue. It has approved ETFs with cryptocurrency futures, but these products are traded on platforms overseen by US financial regulators.

Grayscale is betting that the SEC’s acceptance earlier this month of crypto futures vehicle Teucrium under rules that would govern spot bitcoin ETFs could be used to bolster its case for the regulator.

In a letter sent to the SEC this week, Grayscale said: “We believe the Teucrium order confirms the fundamental point. . .[that]at the time of approving [exchange traded products]there is no basis for treating spot bitcoin products differently from bitcoin futures products.”

Craig Salm, Chief Legal Officer at Grayscale, added that following Teucrium approval, the SEC “is effectively losing the ability to trust the distinction” between the rules governing futures ETFs and spot ETFs as a reason to reject bitcoin-linked funds. physicist.

The SEC declined to comment.

Some compliance professionals remain skeptical about whether Grayscale’s new legal gamble will pay off.

SEC chief Gary Gensler has argued that “largely unregulated” bitcoin markets raise concerns of fraud and manipulation. He also called for cryptocurrency platforms to register with the agency and argued that most tokens are securities and are under the purview of the SEC.

Amy Lynch, founder and president of FrontLine Compliance, a regulatory consultancy, said SEC approval of spot bitcoin ETFs will remain difficult until issues such as pricing, valuation, custody and liquidity of funds are standardized and more transparent.

“Gensler would have to change his position at this point,” added Lynch. “I don’t see him doing that unless there’s some moment of light with these files that answer all the questions. And I think it’s a low probability.”

But cryptocurrency players argue that the evolution of the bitcoin market in recent years should assuage those concerns.

“The markets themselves have become much more robust since the first wave of ETFs was denied in 2017,” Salm said, adding that cryptocurrency exchanges have increased protections through greater trade surveillance and use of technology similar to that of stock exchanges. US nationals.

Matt Hougan, chief investment officer at Bitwise Asset Management – ​​which filed one of the pending orders for a fund that holds bitcoin – said that while the maturation of the CME’s regulated spot bitcoin market was “the most important factor”, the ecosystem The broader cryptographic environment had improved thanks to the launch of regulated ETFs abroad and the entry of more institutional players.

Timothy Spangler, a partner at Dechert, said it was unclear what other information the SEC would require to approve spot bitcoin ETFs when other regulators, such as in Australia and Canada, have approved these products.

These countries “seem to be able to feel comfortable” with the notion that “bitcoin is an asset mature enough to be included in a publicly traded vehicle,” he said.

“I fear that opposition to including larger amounts of cryptocurrencies in retail financial products is more philosophical than it has to do with specifics,” added Spangler. “I don’t think this is an inch game.”

Leave a Comment

%d bloggers like this: