The Securities and Exchange Commission (SEC) has consistently denied aspiring exchange-traded products that aim to offer a Bitcoin ETF based on the spot price of the world’s most popular digital asset. Recently, a Bitcoin ETF based on Bitcoin futures was approved but this was effectively something the SEC had to allow as BTC futures already trade on the Cboe and CME. Grayscale, a firm that already trades a Bitcoin vehicle on OTC Markets, would like to migrate this product to a full-blown exchange.
In an email, Grayscale explained:
“As you may know, in October, NYSE Arca filed Form 19b-4 with the Securities and Exchange Commission (SEC) to convert our flagship product, Grayscale Bitcoin Trust (OTCQX: GBTC), into a spot-based Bitcoin (physically-backed) ETF.
Earlier this year, the SEC allowed several futures-based Bitcoin ETFs to start trading. However, we continue to wait—along with hundreds of thousands of American investors (including GBTC holders)—for U.S. regulators to approve a spot-based Bitcoin ETF application.
We’ve remained steadfast in our belief that this inconsistency creates an unlevel playing field for Bitcoin ETFs, and that the SEC should approve a spot-based Bitcoin ETF, allowing investors choice over which product best meets their investment needs.”
A letter posted by Grayscale attorneys Davis and Folk tells the SEC that it “has no basis for the position that investing in the derivatives market for an asset is acceptable for investors while investing in the asset itself is not.”
Davis and Folk urge the SEC to approve the BTC ETF adding that a “decision to continue disallowing spot Bitcoin ETPs would enmesh the Commission in merit regulation, contrary to its mandate.”
Grayscale is not alone in its advocacy of a Bitcoin ETF. Kristin Smith of the Blockchain Association joins in supporting Grayscale’s pursuit of a Bitcoin ETF chastising the SEC for “unjustifiably [evaluating] Bitcoin futures and spot ETPs under different standards.”
Advocates tend to see a Bitcoin ETF based on spot prices as a more accessible method for investing in Bitcoin as retail investors are comfortable with trading ETFs on an exchange. Detractors see a single asset ETF as not making much sense and the SEC has expressed its concern that Bitcoin prices may be manipulated.
So will the SEC cave on its Bitcoin blockade? The future is uncertain under the leadership of SEC Chairman Gary Gensler.
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