Grayscale urges SEC to approve all Bitcoin ETFs at once.

Grayscale urges SEC to approve all Bitcoin ETFs at once.

The Push for Approval: Grayscale Urges SEC to Approve Spot Bitcoin ETFs

Blockchain Technology

The world of cryptocurrencies is constantly evolving, and one area that has recently been gaining significant attention is the potential approval of spot Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). Grayscale, a prominent crypto fund manager, is now urging the SEC to approve all proposed spot Bitcoin ETFs simultaneously, rather than picking winners and losers. In a recent letter submitted by Grayscale’s chief legal officer, Craig Salm, the company argues that approving the ETFs would be a fair and orderly decision, preventing any one proposal from having an unfair advantage.

The Interconnection Between Spot ETFs and Bitcoin Futures ETFs

Grayscale’s letter emphasizes the link between spot Bitcoin ETFs and their futures counterparts. The SEC has previously approved Bitcoin futures ETFs, indicating that they already possess the ability to approve spot Bitcoin ETFs. Grayscale’s argument is that both types of funds are “inextricably linked.” By drawing this parallel, the company asserts that the SEC’s previous actions should serve as an indication of their capability and readiness to approve spot Bitcoin ETFs.

The Role of Surveillance Sharing Agreements (SSAs)

One crucial element in the push for spot Bitcoin ETF approval is the existence of surveillance sharing agreements (SSAs) between Coinbase and the ETF providers. These agreements enable the sharing of essential information related to trading volumes and other market data. Grayscale notes that recent filings from industry giants like Invesco, BlackRock, Valkyrie, VanEck, Wisdom, Fidelity, and ARK Invest now include SSAs with Coinbase. This move demonstrates the commitment to transparency and addressing the SEC’s concerns about potential market manipulation or irregular trading activity.

The SSA Debate: A Necessary Requirement or Superfluous Measure?

In late June, the SEC postponed its decision on the ETFs due to the absence of SSAs. The commission argued that these agreements were necessary to mitigate the perceived risks of market manipulation in the crypto industry. Grayscale counters this argument by asserting that “SSAs would neither satisfy nor be necessary” under the SEC’s existing standards. They highlight that Coinbase, as the provider of the agreements, is neither registered with the SEC as a securities exchange or broker-dealer nor with the Commodity Futures Trading Commission (CFTC) as a futures exchange. Grayscale implies that the current push for SSAs may not align with the existing regulatory framework.

Ensuring Fairness: Avoiding Prejudice and Discrimination

Grayscale warns against granting an unfair advantage to proposals by approving them in a piecemeal manner. The company argues that such an approach would be a significant departure from the SEC’s consistent application of its standards. Approving spot Bitcoin ETFs would represent a sudden and substantial change, granting an unfair first-mover advantage to the approved proposals. Grayscale suggests that a fair and orderly decision would involve approving all proposals simultaneously, ensuring equal opportunities for all stakeholders in the cryptocurrency market.

The Impact on Grayscale Bitcoin Trust (GBTC)

At the heart of the matter is the potential impact on the Grayscale Bitcoin Trust (GBTC), which currently aims to track Bitcoin’s price. Grayscale claims that the conversion of GBTC into a spot Bitcoin ETF would bring significant value to its nearly 1 million investors. They argue that there is no reason for the SEC to prevent GBTC investors from benefiting from a spot Bitcoin ETF. It is worth noting that the SEC previously denied Grayscale’s application to convert GBTC into a spot Bitcoin ETF last June, leading Grayscale to sue the regulator on grounds of inconsistent treatment for similar investment vehicles.

Looking Ahead: The Future of Spot Bitcoin ETFs

The push for the approval of spot Bitcoin ETFs by Grayscale and other industry players highlights the continuous effort to provide investors with more accessible and regulated options for engaging in the cryptocurrency market. While the outcome remains uncertain, the arguments put forth by Grayscale bring attention to the need for fairness, consistency, and careful consideration of the potential impact on existing investment vehicles. As the blockchain industry continues to evolve, it is crucial for regulators to strike a balance between innovation and investor protection. The approval or denial of spot Bitcoin ETFs will undoubtedly shape the future landscape of the cryptocurrency market.

Grayscale (@Grayscale) July 27, 2023

“The SEC should approve spot #bitcoin ETFs to trade in the US. What’s more, their previous approval of bitcoin futures ETFs shows that they are already in a position to do so. Read more about the latest from our legal team: $GBTC $BTC”

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