The emergence of the exchange-traded fund (ETF) has opened up creative investments, which has led to an increase in thematic funds and also opened the door to cryptocurrencies. A major roadblock, however, has been the Securities Exchange Commission (SEC), which faces a lawsuit from Grayscale Investments after refusing a conversion of its Grayscale Bitcoin Trust (GBTC) to a place Bitcoin ETF.
Shades of Gray Push Back Against SEC’s Spot Bitcoin Denial
Grayscale’s attempt at a spot Bitcoin ETF is not the SEC’s last block. Recently, WisdomTree also attempted to bring a spot Bitcoin ETF to the US stock market, but SEC also refused the approval, noting a lack of investor protection – a common refrain for SEC denials.
Grayscale and other ETF the providers’ goals are clear: to get a spot Bitcoin ETF approval could help bring more institutional money to digital assets, especially after last year’s bull run. Even with 2022’s bear market in cryptocurrencies, there is still great interest in combining this new asset class with the traditional financial market.
The move for Grayscale’s GBTC to a ETF would make it a more dynamic investment vehicle, as well as give it more exposure via a public US stock exchange. However, the SEC’s spate of recent rejections prevents this from being realized.
In the eyes of SEC, it may be a case of the same story different filing application. This is where Grayscale takes issue with the recent denial, noting that the spot Bitcoin product should not be included as part of a blanket denial.
“This strong arbitrariness cannot be justified or reconciled with the commission’s mandate to treat similar cases equally. Rather, it can only be understood as a substantive judgment about the merits of a spot Bitcoin investment — the kind of substantive judgment that is beyond the Commission’s authority,” Grayscale noted in a legal brief.
Given this, the waiting game seems to continue for a spot Bitcoin ETF. It worked after Proshares’ introduction of ProShares Bitcoin ETF (BITO ) last year may have opened the floodgates, but SEC has not given in.
Nevertheless, all is not lost for a spot Bitcoin ETF whether or not it happens before the end of 2022. The introduction of Hashdex Bitcoin Futures ETF (CHALLENGE) could pave the way for a spot Bitcoin ETF in 2023, building on the momentum of DEFI’s introduction to the US market.
But of course there is still the obstacle SEC approval. If crypto market regulation falls under the watchful eye of SECwhich can only grease the wheels for not only a spot Bitcoin ETFbut other cryptocurrency ETF products to enter the market.
“The launch of this Teucrium product only strengthens the foundation of a spot Bitcoin ETF since it uses the exact same fund structure,” said Nate Geraci, president of The ETF Store, a consulting firm. “That said, a ‘strengthened case’ does not mean that SEC will deviate from his hard line. I’m still in the camp that a spot product is simply not approved until then SEC has regulatory oversight of crypto exchanges.”
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