GBTC approval might return a few billion dollars to investors, according to the CEO of Grayscale

Michael Sonnenshein, the CEO of Grayscale Investments, said that if GBTC received approval to “convert” to a spot Bitcoin ETF, there would “no longer” be a discount or premium in light of current legal action against the SEC.

Michael Sonnenshein, CEO of Grayscale Investments, indicated in a recent interview that he “can’t fathom” why the United States Securities and Exchange Commission (SEC) “wouldn’t want” to safeguard Grayscale investors and recover their genuine asset value.

Sonnenshein said that the SEC “violated the administrative processes act” by rejecting clearance for the Grayscale Bitcoin Trust (GBTC) to be a spot Bitcoin exchange-traded fund (ETF) in June 2022, in an appearance on a popular podcast hosted by Peter McCormack on February 25.

He noted that the legislation prevents regulators from showing “favoritism” or acting “arbitrarily,” adding that the SEC behaved “arbitrarily” by authorizing Bitcoin Futures ETFs but rejecting “GBTC’s conversion.”

Sonnenshein said that when the SEC began allowing the first Bitcoin ETFs, Grayscale saw it as an indication that the SEC was “changing its stance towards Bitcoin.”

If GBTC was certified as a spot Bitcoin ETF, he added, “a few billion dollars” of cash would quickly return to investors’ wallets “overnight,” as the fund would “bleed back” to its net asset value (NAV).

Sonnenshein noted that this is because GBTC is now trading at a discount to its NAV, but if it were to convert to an ETF, it would “no longer” trade at a discount or a premium; an “arbitraged mechanism” would be included.

He maintained that Grayscale is “currently fighting the SEC” and that a ruling challenging the SEC’s refusal of its original application may be rendered as early as “fall 2023.”

In addition, he said that Grayscale has over a million investor accounts and that global investors depend on the company to “do the right thing for them.”

Sonnenshein “cannot fathom” why the SEC would not wish to “protect investors” and “restore their value.” He said that Grayscale would not “hide” the fact that it has a “commercial interest” in this approval, stressing that if the motion to challenge the SEC is refused, Grayscale might appeal to the U.S. Supreme Court.

This comes after the SEC submitted a 73-page brief with the U.S. Court of Appeals for the District of Columbia in December 2022, explaining why it denied Grayscale’s June 2022 request to convert its $12 billion Bitcoin Trust into a spot-based Bitcoin ETF.

The SEC determined that Grayscale’s approach did not provide enough protection against fraud and manipulation. The regulator has reached the same conclusions in previous applications for spot-based Bitcoin ETFs.

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