Saturday, July 20, 2024

The United States Securities and Exchange Commission (SEC) has opted not to appeal a judicial verdict supporting Grayscale’s endeavor to transform its bitcoin trust (GBTC) into a spot bitcoin exchange-traded fund (ETF). The decision to forgo an appeal within the 45-day window comes after Grayscale had contested the SEC’s initial denial to approve the conversion.

Previously on Friday, knowledgeable individuals, cited by news outlets such as Reuters and Bloomberg, divulged prior to the expiration of the appeal deadline that the Commission had no intentions of challenging the late-August ruling by the U.S. Court of Appeals for the District of Columbia Circuit. This ruling had set aside the SEC’s initial denial of Grayscale’s application.

Grayscale’s legal action against the SEC posited that the regulatory body had previously endorsed surveillance agreements aimed at mitigating fraudulent activities in bitcoin futures ETFs. Therefore, Grayscale argued, the same rationale should be extended to its application for a spot bitcoin ETF, given that both kinds of investment vehicles are predicated on bitcoin pricing. The presiding judge of the Circuit Court characterized the SEC’s refusal as “arbitrary and capricious,” criticizing the agency for failing to elucidate why it treated similar financial instruments differently.

A spot bitcoin ETF would allow investors to gain financial exposure to the preeminent cryptocurrency without the necessity of direct ownership. Both the cryptocurrency sector and traditional financial market stakeholders have been actively seeking regulatory consent for such financial products.

Despite authorizing ETFs connected to bitcoin futures in 2021, the SEC has not yet sanctioned any spot bitcoin ETFs. Previously, the agency had turned down similar applications; however, this year, it has taken under consideration multiple proposals, including one from the financial conglomerate Blackrock.

The SEC has also deferred its final judgement on several pending applications. In September alone, the agency postponed decisions on applications from Blackrock, Valkyrie, Bitwise, Invesco, Ark 21shares, Global X, among others. Additionally, as of the end of August, judgements on proposals from Wisdomtree, Vaneck, and Fidelity were also put on hold. The SEC has until the following year to arrive at its final conclusions.

In Grayscale’s specific case, the appellate court is anticipated to issue a mandate detailing how its decision is to be implemented. This could potentially direct the SEC to reconsider Grayscale’s application, as indicated by Reuters in its coverage. Bloomberg’s analyst James Seyffart projected that conversations between Grayscale and the SEC are likely to commence in the upcoming week.

We invite your perspectives on the future landscape of spot bitcoin ETFs in the United States. Please share your thoughts in the comments section below.

Frequently Asked Questions (FAQs) about Grayscale’s Spot Bitcoin ETF

What is the significance of the U.S. SEC not appealing the court’s decision on Grayscale’s spot Bitcoin ETF?

The decision by the U.S. Securities and Exchange Commission (SEC) not to appeal the court ruling in favor of Grayscale signifies a potentially pivotal moment for the crypto industry in the United States. This could open the doors for further regulatory scrutiny and approval of spot Bitcoin ETFs, which have been a subject of interest for both the crypto and traditional financial markets.

Who is Grayscale and what is a spot Bitcoin ETF?

Grayscale is a crypto asset manager that has been seeking to convert its existing bitcoin trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF). A spot Bitcoin ETF would allow investors to gain financial exposure to Bitcoin without having to own the cryptocurrency directly.

What was the SEC’s original stance on Grayscale’s application?

The U.S. SEC initially denied Grayscale’s application to convert its bitcoin trust into a spot Bitcoin ETF. Grayscale then filed a legal action against the SEC, arguing that the agency had approved similar arrangements for Bitcoin futures ETFs and should apply the same rationale to its application.

What did the U.S. Court of Appeals for the District of Columbia Circuit rule?

The court ruled in favor of Grayscale, overturning the SEC’s initial rejection of the application. The presiding judge criticized the SEC’s decision as “arbitrary and capricious,” stating that the agency failed to explain why it treated similar financial products differently.

What are the next steps for Grayscale and the SEC?

The appellate court is expected to issue a mandate that outlines how its decision should be implemented. This could include instructing the SEC to revisit Grayscale’s application. Conversations between Grayscale and the SEC regarding this matter are projected to commence in the upcoming week.

What does this mean for other companies seeking to launch a spot Bitcoin ETF?

While the court ruling specifically concerns Grayscale, it sets a potential precedent that could influence future decisions on similar applications. The SEC is currently reviewing multiple other applications for spot Bitcoin ETFs and has until the next year to make its final decisions.

More about Grayscale’s Spot Bitcoin ETF


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SkepticalInvestor October 15, 2023 - 3:25 am

SEC not appealing doesn’t mean they’re approving it. I’d hold my horses before declaring a win for Grayscale or crypto. Rules can change fast.

CryptoEnthusiast October 15, 2023 - 5:09 am

Finally some good news for Grayscale! Their GBTC has been kinda stagnant. A spot ETF would definitely shake things up. Big win for crypto overall!

WallStVeteran October 15, 2023 - 12:30 pm

If Grayscale secures this, it’d signify a maturation of the crypto markets. Finally some institutional products for serious investors to consider.

JohnDoe42 October 15, 2023 - 9:46 pm

Wow, didnt see that coming. SEC not appealing could be a game changer for the crypto market. whats next?

MarketWatch2023 October 15, 2023 - 10:03 pm

SEC’s move is interesting. If Grayscale’s spot Bitcoin ETF gets the green light, it might open the floodgates for other companies. Buckle up, folks!


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