Grayscale, the world’s largest digital assets manager today announced it had made a fresh bid to secure approval from the US Securities and Exchange Commission (SEC) to turn itself into a bitcoin ETF, Financial Times reports, April 23, 2022.
Grayscale Committed to Becoming a Bitcoin ETF
The world’s premier digital asset manager Grayscale has made a fresh attempt at transforming itself into a spot bitcoin exchange-traded fund (ETF). Should the firm’s latest appeal be accepted by the US financial regulator, it would become the country’s first spot bitcoin ETF.
In its fresh bid with the SEC, Grayscale has focused largely on the legal hurdles that have, until now, prevented the firm from becoming a regulated spot bitcoin ETF. The application seeks to convert Grayscale’s $40 billion Bitcoin Trust into an exchange-traded fund, details of the letter sent to the regulator show.
Notably, Grayscale’s latest attempt at becoming a spot bitcoin ETF comes at a time when the SEC is mulling the decision to provide a greenlight for US ETFs to hold bitcoin instead of derivatives linked to the premier cryptocurrency.
For the uninitiated, to date, only bitcoin futures ETFs have been approved in the US which means that the traders of these ETFs do not necessarily hold exposure to physical bitcoin. The SEC noted that it will decide regarding Grayscale’s application in early July at the latest.
Spot Bitcoin ETFs Remain a Distant Dream in the US
While Grayscale continues to push the SEC to approve what would effectively be the US’ first spot bitcoin ETF, it doesn’t look like the regulator is too keen on approving a spot bitcoin ETF just yet.
To date, several digital asset firms, investment companies, and the like have applied with the SEC in hopes of receiving a green light for a spot bitcoin ETF but to no avail.
As reported in March by crypto.news, the SEC rejected the applications of two funds, namely the New York Digital Investment Group and Global X for spot bitcoin ETF listings in June and August 2021, respectively.
On the contrary, however, the financial regulator continues to approve futures bitcoin ETFs as they do not require the fund to hold physical BTC. Rather, futures ETFs obtain exposure to BTC via futures contracts that don’t exactly put any real demand pressure on the underlying cryptocurrency.
That being said, the demand for a spot bitcoin ETF has continued to swell in the recent months. A recent survey by Nasdaq unveiled that there is a significant number of financial advisors with a strong demand for a spot bitcoin ETF.
On why the SEC continues to reject spot bitcoin ETFs, the report adds:
“The SEC has pushed back against so-called spot crypto ETFs due to concerns that the coins trade on unregulated platforms where surveillance is difficult and manipulation a consistent problem. It has approved ETFs holding crypto futures, but those products trade on platforms that are overseen by US financial regulators.”
In Grayscale’s case, the company believes that the SEC’s acceptance earlier this month of the Teucrium futures crypto vehicle under rules that typically govern spot ETFs could be used as a measure to bolster its bid for a spot ETF for BTC.
Grayscale, in a letter submitted to the SEC this week, said:
“We believe the Teucrium order confirms the fundamental point . . . [that] when it comes to approving [exchange traded products], there is no basis for treating spot bitcoin products differently from bitcoin futures products.”
The SEC declined to comment on the matter.
Seeing the strong demand for a spot bitcoin ETF, coupled with the lack of regulatory clarity on the SEC’s part while approving a crypto ETF, Grayscale CEO Michael Sonnenshein reckons that it won’t be long before the financial regulator approves a spot bitcoin ETF.