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Grayscale, a cryptocurrency hedge fund, has told the Securities and Exchange Commission (SEC) that their rejection of Bitcoin (BTC) ETFs is unreasonable.
Grayscale responded to the SEC’s brief last month, stating that turning the Grayscale Bitcoin Trust (GBTC) into a spot BTC ETF will benefit traders significantly by raising value and offering extra investor protections.
Grayscale filed a lawsuit against the SEC in June 2022. The business claimed in October 2022 that the SEC was biased when it declined the hedge fund’s proposal for a Bitcoin ETF in June of that year.
Grayscale claims in the complaint that the SEC’s certification of other BTC-related products, such as a BTC futures ETF on the Chicago Mercantile Exchange (CME), is inconsistent with its rejection of Bitcoin ETFs. Grayscales’ latest response reads:
“For more than 850,000 investors, converting GBTC to a spot Bitcoin ETF would unlock over $4 billion of value by providing the regulatory relief necessary for the product to simultaneously create and redeem shares, thereby enabling arbitrage to address both premiums and discounts of the shares as compared to net asset value.
This conversion would also subject trading in GBTC to heightened regulatory standards and enhance investor protections. The SEC’s reluctance to further bring Bitcoin into the regulatory perimeter through a spot Bitcoin ETF has prevented US investors from gaining the Bitcoin investment exposure they both want and deserve.”
In addition, the hedge fund iterates:
“The Order in this case is arbitrary to its core. Its central premise – that the Exchange’s surveillance-sharing agreement with the CME provides adequate protection against fraud and manipulation in the Bitcoin futures market but not the spot Bitcoin market – is illogical.
Any fraud or manipulation in the spot market would necessarily affect the price of Bitcoin futures, thereby affecting the net asset value of an ETP holding either spot Bitcoin or Bitcoin futures as well as the price investors pay for such an ETP’s shares.”
Grayscale has previously said to expect the lawsuit to take a minimum of two years. Until now, the SEC has yet to approve a first Bitcoin spot ETF in the country.