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In a letter addressed to the U.S. Securities and Exchange Commission (SEC), Grayscale Investments has appealed for the equal treatment of all spot Bitcoin exchange-traded funds (ETFs).
Call For Equal Treatment
Joseph A. Hall from the law firm Davis Polk & Wardwell, representing Grayscale Investments, has penned a letter directly addressing the SEC Secretary Vanessa Countryman. In the letter, Mr. Hall, who is acting as spokesperson for the investment firm, has expressed concerns about the SEC's differential treatment towards commodity-based exchange-traded products (ETPs) that hold Bitcoin while requesting the regulatory body to reconsider its stance on spot Bitcoin ETPs.
In June 2022, the SEC disapproved a proposed rule change by NYSE Arca to list and trade shares of the Grayscale Bitcoin Trust. Grayscale has since sought a review of the SEC's decision by the U.S. Court of Appeals for the District of Columbia Circuit.
Call For Investor Protection
Grayscale had discussed the viability of surveillance-sharing agreements with the SEC in 2019. The company contends that the SEC already possesses the means to approve spot Bitcoin ETPs based on its previously articulated standard.
(Spot Bitcoin ETPs and Bitcoin futures ETPs are the two categories of commodity-based ETPs designed to hold Bitcoin. The former holds actual Bitcoin, while the latter involves Bitcoin futures contracts traded on the Chicago Mercantile Exchange.)
Although the SEC has approved Rule 19b-4 filings for Bitcoin futures ETPs, it has not done the same for spot Bitcoin ETPs. The former is attributed to their surveillance-sharing agreements with the CME.
An excerpt from the letter reads,
“An approval that promotes investor protection and fairness for issuers should therefore be made simultaneously with approval of all proposed spot bitcoin ETPs, including those such as the Trust whose Rule 19b-4 filings were previously disapproved after lengthy Commission consideration,”
Grayscale-SEC Legal Saga
Grayscale argues that approving only specific spot Bitcoin ETP proposals would grant an unfair first-mover advantage and implies discriminatory treatment. The investment firm insists that the approval process should prioritize the interests of all investors and simultaneously approve all proposed spot Bitcoin ETPs.
With over $18 billion in assets, the Grayscale Bitcoin Trust (GBTC) provides investors with exposure to the original cryptocurrency. However, the firm has encountered multiple rejections from the SEC regarding its efforts to transform its flagship Bitcoin fund into a spot Bitcoin ETF.
A spot Bitcoin ETF is highly anticipated within the crypto community as it would allow institutions to gain Bitcoin exposure without the need to actually possess the digital asset. Such an ETF is considered a significant milestone in the path toward widespread Bitcoin adoption and would validate cryptocurrencies as a legitimate asset class.
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