Crypto asset manager Grayscale is urging the U.S. Securities and Exchange Commission (SEC) to approve all spot Bitcoin exchange-traded fund (ETF) applications at the same time to avoid preferential treatment, according to a letter filed by the company’s legal team on July 27.
Craig Salm, the chief legal officer at Grayscale, said the fund manager’s letter argues that the SEC should grant equal treatment to all eight spot Bitcoin ETF applicants.
Instead of cherry-picking “winners and losers”, the financial regulator should “continue to provide issuers with feedback or guidance consistently and equitably”, read the statement.
Grayscale Wants SEC to Treat All Spot Bitcoin ETF Applicants Fair and Square
Grayscale wants the SEC to approve a spot Bitcoin ETF “in a way that’s fair for all investors and issuers”, whether it follows a court mandate or “through an evolution” in its policies regarding cryptocurrencies.
The asset manager said its ultimate goal is to ensure that American investors are protected and have access to the Bitcoin investment vehicle of their choice.
The eight spot Bitcoin ETFs awaiting the SEC’s approval are; iShares (BlackRock), Ark 21 Shares, Wise Origin (Fidelity), WisdomTree, VanEck, Valkyrie, Invesco Galaxy, and GBTC Trust (Grayscale).
In the letter, Grayscale articulates that the SEC could approve spot Bitcoin ETFs on the basis of previous approvals given to Bitcoin futures ETFs. The company cited third-party studies that showed a 99% correlation between Bitcoin’s spot and futures markets.
This means surveillance policies applied to the CME (Chicago Mercantile Exchange) Bitcoin futures market – an exchange regulated by the Commodities and Futures Trading Commission (CFTC) – will be able to sufficiently protect against “potential fraud or manipulation in the underlying spot Bitcoin market”.
Surveillance Sharing Agreements (SSAs) Fail To Meet SEC Guidelines
Grayscale added that the current surveillance sharing agreements (SSAs) recommended for the spot ETF providers would not meet the SEC’s guidelines.
Recently, the SEC asked all spot Bitcoin ETF applicants to update their proposals to include SSAs. The securities watchdog said the agreement was required because there is a high chance for price manipulation in the crypto markets.
Invesco, BlackRock, Valkyrie, Fidelity, Wisdom, VanEck, and ARK Invest reached a deal with crypto exchange Coinbase to become their SSA provider. As per the agreement, Coinbase would share all information on its trading books with the SEC, which will then be monitored by the financial regulator for any possible market manipulation or irregular trading activity.
However, Grayscale claims that under the SEC’s current standards, SSAs are not satisfactory or are a necessity. The reason being Coinbase is not registered with the SEC as a securities exchange or brokerage nor as a futures exchange with the CFTC.
If the regulator were to approve the ETFs, it would be a “sudden and significant change” in its policy application and would grant a “first-mover advantage” to the proposals, read Grayscale’s letter.
Last June, the SEC rejected Grayscale’s application for converting its Grayscale Bitcoin Trust (GBTC) to a spot ETF, claiming that the proposal did not meet the agency’s anti-fraud and investor protection standards.
Grayscale went on to sue the SEC, arguing that the regulator was acting with an agenda by failing to apply consistent treatment to similar investment products. In its court filing, the company quoted that the SEC had previously deemed standards applicable to the CME – where Bitcoin futures are traded – as sufficient to prevent fraud in Bitcoin-based ETFs.
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Grayscale Expects GBTC To Return “Billion of Dollars” In Value If Converted To An ETF
Grayscale Bitcoin Trust (GBTC) allows investors to trade shares in trusts holding Bitcoin. GBTC tracks the price of Bitcoin and enables investors to gain access and exposure to the crypto asset in the form of security without ever having to face the challenge of buying, storing, or selling it.
As per Grayscale’s statistics, there are nearly a million GBTC owners across all 50 U.S. states. And if converted to an ETF, the company expects GBTC to return billions in value to investors.
Grayscale argued that when the SEC is ready to approve spot Bitcoin ETF applications, there is no reason for it to discriminate against GBTC investors. The asset manager ends the letter by promising that it will continue to advocate for the cause on behalf of its customers.
At the time of writing, Bitcoin (BTC) is trading at $29,275 – down 0.7% in the last 24 hours.
