Cryptocurrency asset supervisor Grayscale Investments has despatched a letter to the U.S. Securities and Change Fee (SEC) arguing that new spot Bitcoin ETF filings reminiscent of Blackrock’s, based mostly on prior rulings, shouldn’t be accepted based on precedent.
The letter argues that the regulator should approve any spot bitcoin exchange-traded merchandise (ETPs) in a constant and even-handed method, commenting that together with a surveillance sharing settlement with Coinbase is insufficiently totally different from beforehand rejected filings.
Nonetheless, if the current ETF filings are accepted, Grayscale requests its rejected software even be accepted concurrently to permit for the dialog of GBTC right into a spot Bitcoin ETF.
Grayscale Bitcoin Belief conversion
Grayscale operates the Grayscale Bitcoin Belief (GBTC), which holds Bitcoin instantly in belief. Grayscale initially filed to have GBTC listed for buying and selling on the NYSE Arca alternate however was rejected by the SEC in 2022, a call the agency is now difficult in court docket.
Prior to now month, asset managers have submitted a number of different spot Bitcoin ETP filings to the SEC, together with BlackRock, ArkInvest, and VanEck. These new filings point out deliberate surveillance-sharing agreements with crypto alternate Coinbase. Some observers suppose such agreements may pave the best way for SEC approval this time round.
Nonetheless, Grayscale highlighted, the SEC has beforehand indicated that surveillance-sharing with an unregulated buying and selling platform like Coinbase doesn’t alone fulfill the standards for approving a Bitcoin ETP. So if the SEC now reverses course based mostly on the Coinbase agreements, this is able to symbolize an inconsistent change in coverage. The letter states,
“However because the Fee is aware of, the potential of a surveillance-sharing settlement between an inventory alternate and a spot bitcoin buying and selling venue isn’t a brand new concept. Certainly, Grayscale mentioned the viability of this method with Fee employees in 2019.”
In accordance with Grayscale’s letter, surveillance-sharing with a regulated Bitcoin futures market such because the Chicago Mercantile Change (CME) is by itself sufficient to fulfill regulatory necessities for Bitcoin ETPs, based on SEC rulings on Bitcoin futures ETFs. Grayscale cited the under assertion from the SEC.
“CME’s surveillance can fairly be relied upon to seize the consequences on the CME bitcoin futures market brought on by an individual making an attempt to control the proposed futures ETP by manipulating the worth of CME bitcoin futures contracts… not directly by buying and selling outdoors of the CME bitcoin futures market”
The letter continued to state the above makes clear that “the Fee acknowledges that CME’s surveillance can seize the consequences of buying and selling on bitcoin spot markets.”
Given this precedent, Grayscale argued that if the SEC is open to contemplating Coinbase agreements as related, it should enable amendments to beforehand rejected filings like GBTC to incorporate related agreements as nicely.
The SEC ought to then approve all spot Bitcoin ETPs concurrently to keep away from unfair discrimination between issuers, satisfying ideas of investor safety, equity and due course of. Particularly, the letter reads,
“Having beforehand rejected the argument {that a} surveillance-sharing settlement with a spot bitcoin buying and selling venue would, in complete or partly, fulfill the Fee’s necessities for approving a spot bitcoin ETP, if the Fee decides to vary course and approve a number of of the above-referenced spot bitcoin ETPs on this foundation, it should achieve this in a good and orderly method—a way that prioritizes the pursuits of traders, particularly the practically a million who at the moment maintain shares within the Belief.”
In essence, Grayscale contends the SEC should consider spot Bitcoin ETP proposals constantly, with out abruptly altering course to profit newer filings over prior ones.
The letter illustrates how the standing of Bitcoin ETPs within the U.S. stays advanced and contentious, with regulators and trade contributors deciphering coverage cues in very alternative ways. Nonetheless, it might be seen by some as throwing chilly water on the fireplace lit by institutional giants reminiscent of Blackrock’s Larry Fink pushing for higher entry to identify Bitcoin-exposed monetary merchandise.
