Regulation

Grayscale Replies to SEC, Argues That Bitcoin (BTC) Spot ETF Denial Is Illogical

Crypto hedge fund Grayscale is telling the U.S. Securities and Trade Fee (SEC) that its denial of Bitcoin (BTC) exchange-traded funds (ETFs) is “illogical.”

Replying to a short filed by the SEC final month, Grayscale says that changing the Grayscale Bitcoin Belief (GBTC) right into a spot BTC ETF would drastically profit merchants by unlocking worth and rising investor protections.

“For greater than 850,000 traders, changing GBTC to a spot Bitcoin ETF would unlock over $4 billion of worth by offering the regulatory aid needed for the product to concurrently create and redeem shares, thereby enabling arbitrage to deal with each premiums and reductions of the shares as in comparison with web asset worth.

This conversion would additionally topic buying and selling in GBTC to heightened regulatory requirements and improve investor protections. The SEC’s reluctance to additional deliver Bitcoin into the regulatory perimeter via a spot Bitcoin ETF has prevented US traders from gaining the Bitcoin funding publicity they each need and deserve.”

Grayscale first sued the SEC in June 2022. In an October 2022 submitting, the agency alleged that the regulatory company was displaying bias when it rejected the hedge fund’s bid for a Bitcoin ETF in June.

Within the lawsuit, Grayscale claims that the SEC’s approval of different BTC-related merchandise, comparable to its approval of a BTC futures ETF on the Chicago Mercantile Trade (CME), is inconsistent with its rejection of Bitcoin ETFs.

Within the official court docket submitting, Grayscale refers to the SEC’s determination to grant a futures BTC ETF on CME based mostly on its degree of safety as “illogical” as a result of the identical sort of safety can be wanted to function a BTC ETF.

“The Order on this case is unfair to its core. Its central premise – that the Trade’s surveillance-sharing settlement with the CME supplies enough safety in opposition to fraud and manipulation within the Bitcoin futures market however not the spot Bitcoin market – is illogical.

Any fraud or manipulation within the spot market would essentially have an effect on the worth of Bitcoin futures, thereby affecting the online asset worth of an ETP [exchang-traded product] holding both spot Bitcoin or Bitcoin futures in addition to the worth traders pay for such an ETP’s shares.”

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