Grayscale Fires Back at SEC over Bitcoin Spot ETFs

After the Securities and Exchange Commission (SEC) in the United States rejected VanEck’s application for a spot Bitcoin ETF, Grayscale Investments has taken a shot at the regulatory authority. A letter was issued by the Grayscale Bitcoin Trust (GBTC)’s operator to Vanessa Countryman, the Secretary of the SEC, on November 29th. The letter highlighted that the SEC was wrong in rejecting the spot Bitcoin ETF, particularly after it has given approval for three bitcoin futures ETFs, one from ProShares, Valkyrie and VanEck each. According to Grayscale, the SEC does not have a basis for supporting the statement that it is acceptable for investors to invest in the derivatives market for a particular asset, but not buy the asset itself.

It went on to say that the SEC was actually in violation of the Administrative Protection Act (APA) because it had not treated the two Bitcoin ETF products in the same manner. Traders can use a Bitcoin futures ETF for speculating on Bitcoin’s future price through derivatives. When it comes to a spot Bitcoin ETF, traders will be able to make trades on the current price of the asset, which means it would function in the same way as you would hold the asset.

It is important to note that Grayscale is not exactly a disinterested party because back in October, they had also filed an application for listing their GBTC as a Bitcoin spot ETF and a decision is expected on Christmas Eve. A similar application from VanEck was rejected by the SEC on November 12th on the grounds that it was not in accordance with the requirements outlined in the Securities Exchange Act of 1934 (Exchange Act). Grayscale is not in agreement with the grounds of rejection that the SEC highlighted.

It said that the SEC had not taken the significant competitive and regulatory developments that have taken place since 2017 when an application from a national securities exchange to list a spot Bitcoin ETF and trade its shares had been denied by the Commission. According to Grayscale, when the SEC granted approval for Bitcoin Futures ETFs, it enabled the applicants to sidestep some of the requirements in the Exchange Act under Section 6(5)(b), which applicants of the spot Bitcoin ETFs are required to adhere to. The purpose of this section is to offer protection to investors as well as public interest by preventing market manipulation and fraud. Plus, it also disallows unfair discrimination between dealers, brokers, issuers and customers.

Grayscale had claimed that its bitcoin spot ETF would be listed as early as July 2022, but it remains unclear if that prediction would become a reality. In other news, the company has recently introduced a Solana trust and the total assets under management has now reached a whopping $54 billion. This new trust has become the 16th crypto investment product to be introduced by Grayscale and as the name indicates, it will solely be dedicated to investing in Solana (SOL). The company’s CEO said that customers are now looking beyond bitcoin and ethereum towards other digital assets.

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