Crypto fund manager Grayscale urges SEC to approve all proposed spot Bitcoin ETFs simultaneously, emphasizing fairness and impartiality in the regulation process.
Chief Legal Officer at Grayscale, Craig Salm, shared a blog post on July 27. He emphasized that the SEC, a disclosure-based regulator, should refrain from picking winners and losers among ETF applicants.
The Grayscale Bitcoin Trust (GBTC), which manages assets worth over $18 billion, offers investors exposure to the pioneer cryptocurrency. The firm has been contesting the SEC’s repeated denials to convert its flagship Bitcoin (BTC) fund into an ETF.
A spot Bitcoin ETF would enable institutional investors to gain exposure to Bitcoin without the need to hold the digital asset directly. Such approval is considered pivotal within the cryptocurrency community, potentially leading to broader Bitcoin adoption and legitimizing crypto as a recognized asset class.
Firms navigating SEC’s requirements for a spot Bitcoin ETF
The SEC has seen a surge in spot Bitcoin ETF applications in June, triggered by an initial submission from BlackRock, one of the world’s largest asset managers. Other firms, including Fidelity, WisdomTree, and Invesco, swiftly followed suit, turning the approval process into a competitive race.
Despite growing interest, the SEC has hesitated to greenlight a spot Bitcoin ETF for over a decade, citing concerns about potential fraud and market manipulation. Notably, BlackRock and Fidelity’s initial applications were deemed inadequate due to insufficient surveillance-sharing agreements for market monitoring.
Unlike futures-based ETFs, which derive their pricing from commodity exchange contracts like the Chicago Mercantile Exchange, spot-based ETFs offer direct exposure to Bitcoin’s price movements.
However, companies like BlackRock and Fidelity have taken steps to address the SEC’s concerns by refining their applications. For instance, BlackRock has indicated that it is finalizing a surveillance agreement with Coinbase, a major cryptocurrency exchange.
The proposed agreement involves cooperation with Nasdaq, where Coinbase will provide market data for orders and trades, and Nasdaq can request additional information to investigate potential market manipulation.
The SEC has already approved several futures-based Bitcoin ETFs, including a leveraged variant, which Grayscale has argued should be sufficient.
Grayscale’s Chief Legal Officer, Salm, reiterated that the spot and futures markets for Bitcoin are interconnected, and existing surveillance agreements for products regulated by the Commodity Futures Trading Commission should satisfy regulatory requirements.
In its ongoing lawsuit against the SEC, Grayscale has found support from the presiding judge, who appeared to question the agency’s reluctance to approve a spot ETF during a March hearing, hinting at potential arbitrary decision-making.
Whether the SEC’s approval of a spot ETF is triggered by a court mandate or an internal shift in its stance, Salm asserted that it must be executed fairly for all investors and issuers.
Grayscale has shown its readiness to cooperate with regulators to obtain approval for its spot ETF application, initially submitted in 2016. Salm reaffirmed the firm’s commitment to pursuing the conversion of GBTC into an ETF by any means necessary.