Grayscale Investments questioned the Securities and Exchange Commission’s (SEC) decision to prohibit Bitcoin Spot ETFs in a letter dated 29 November. The asset management said that the commission lacks “any justification” for allowing investment in the derivatives market rather than “in the asset itself.”
The SEC has recently rejected a number of offerings, including one by VanEck. While Grayscale views it “discriminatorily,” the company is also seeking approval of its application to convert the Grayscale Bitcoin Fund (GBTC) to a spot offering.
Dave LaValle, Global Head of ETFs at Grayscale Investments, has argued, citing substantial demand for physically-backed products.
“At Grayscale, we think that if regulators are okay with ETFs that hold futures on a particular asset, they should also be comfortable with ETFs that provide exposure to the product’s spot price.”
Grayscale further emphasised in the aforementioned letter that since Bitcoin is not a “security,” it does not need registration under the Investment Company Act of 1940. Additionally, it called into doubt the regulator’s earlier disapprovals based on fraud and market manipulation concerns. According to the business, the ruling “discriminates unjustly against BTC and its shareholders” and breaches the Administrative Procedure Act (APA).
The crypto sector has long pleaded for the creation of a physically-backed spot ETF. Bitwise also gambled on a spot product earlier this month, as CIO Matt Hougan noted.
“At the end of the day, what many investors want is a spot Bitcoin ETF. That, we believe, is doable. As a result, Bitwise will continue to pursue that objective and will seek for other methods to assist investors in gaining access to the amazing potential in cryptocurrency.”
Regulator Gary Gensler, on the other hand, is more comfortable with crypto-Futures ETFs than with any spot offers. The letter also discussed how, although the market has embraced the presently trading Bitcoin Futures contracts, the “Commission has continued to use its ambiguous and arbitrary Section” to differentiate the two products.
“Under the APA, the Commission is required to treat identical items similarly unless it has a valid justification for treating them differently.”
According to Grayscale, the investor risks associated with Bitcoin-backed spot and futures exchange products are “indistinguishable.” It continued by stating that “unfair” treatment is more likely to hurt than safeguard US investors.
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