The United States Securities and Exchange Commission (SEC) has shot down the application by Grayscale Investment to convert their Bitcoin Fund into an Exchange Traded Fund (ETF).
Grayscale Bitcoin ETF Application Denied
In an update on June 29, Grayscale Investment, a digital asset management fund managing the GBTC, the world’s largest Bitcoin trust, said they “fervently disagree” with the regulator’s decision, are disappointed, but are prepared.
However, they are still committed to working proactively with regulators. Their team, Grayscale Investment said, has filed a Petition for Review with the D.C. Circuit Court of Appeals. This document officially initiates a lawsuit contesting the SEC’s decision.
We fervently disagree with the SEC’s decision. We are disappointed. We are prepared. We have spent months preparing for all scenarios. No realistic outcome would have been a surprise. Our team has filed a Petition for Review with the D.C. Circuit Court of Appeals. This document officially initiates a lawsuit contesting the SEC’s decision.
GBTC Trading at a Discount
By not approving their application, Grayscale says the regulator is failing to bring the world’s largest Bitcoin fund into “the U.S. regulatory perimeter and providing U.S. investors access to Bitcoin through the familiar protections of an ETF wrapper.”
Currently, the GBTC is available for purchase in licensed OTC markets. It is trading with a 30 percent discount to net asset value (NAV), representing an estimated $8 billion in unrealized shareholder value.
The SEC is Cautious about a Bitcoin ETF
As of late H1 2022, the SEC had failed to approve any application for a Bitcoin ETF that directly tracks the price of BTC.
In their preview, the cryptocurrency market is not well developed, claiming that it is heavily manipulated and lacks proper monitoring tools common in the traditional sector. Therefore, by preventing a regulatory-complaint Bitcoin ETF in the markets, the former SEC chair during the Trump Administration, Jay Clayton, said the agency is actively protecting the interests of investors.
However, the SEC green-lighted a Bitcoin Futures ETF, a BTC derivative product that tracks the Bitcoin Futures prices streamed from some of the U.S. regulatory complaint cryptocurrency exchanges, in October 2021.
Although the move was interpreted as positive, allowing institutions to get indirect exposure to Bitcoin through licensed channels, the community wasn’t satisfied. Most were banking on the SEC to approve Grayscale’s application of converting their fund into a Bitcoin ETF that directly tracks its price, not its derivative.
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