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Grayscale Asserts SEC Lacks Basis for Denying Bitcoin ETF Conversion

Sep 6, 2023 at 03:23 pm

The Securities and Exchange Commission (SEC) has received a recent directive to revisit its prior denial of Grayscale Bitcoin Trust's (GBTC) application for transformation into an exchange-traded fund (ETF). It is important to underscore that this reassessment does not automatically ensure a green light for approval.

Grayscale Investments has formally communicated to the U.S. Securities and Exchange Commission that they identify no valid reasons to oppose the conversion of GBTC into an ETF. In the D.C. Circuit Court of Appeals, the SEC has been instructed to reevaluate their previous rejection, with Circuit Judge Neomi Rao concurring with Grayscale's assertion that their proposed product closely resembles existing U.S. exchange-traded products (ETPs) linked to bitcoin futures.

In a letter addressed to the regulatory body on Tuesday, Grayscale's legal team expressed the viewpoint that, "Once the Commission thoroughly evaluates the court's position within the context of the initial denial rationale... we firmly believe that the Commission should find no grounds to distinguish the Trust from ETPs that are invested in bitcoin futures contracts."

Additionally, Grayscale criticized the SEC for consistently turning down applications for spot bitcoin ETFs. They argued that if there were any significant distinctions between these and futures-based products, they would have become apparent in one of the 15 Commission orders that rejected spot bitcoin Rule 19b-4 submissions, even after bitcoin futures ETPs had obtained approval for trading.

It is imperative to stress that the recent court decision mandates the SEC to reevaluate Grayscale's application; however, it does not guarantee automatic approval, despite the positive tone of Grayscale's letter suggesting otherwise.

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