In a significant development for the cryptocurrency market, the US Securities and Exchange Commission (SEC) has decided not to appeal the court decision regarding Grayscale’s application to convert its Bitcoin Trust into an exchange-traded fund (ETF). This decision could pave the way for the first Bitcoin ETF to be approved in the United States. Here are the details…
SEC makes its decision on Grayscale’s Bitcoin ETF move
The SEC faced a deadline to appeal the court’s overturn of its initial ruling, but they chose not to appeal, according to a person familiar with the matter, Reuters reported. This decision led to the price of Bitcoin rising rapidly and the cryptocurrency surpassing the $27,000 mark. The journey to this point began in August, when the D.C. Court of Appeals ruled that the SEC’s denial of Grayscale Investment’s application was “arbitrary and capricious.” The court emphasized that federal agencies must “treat similar cases in the same manner.” This decision marked a turning point in the SEC’s approach to cryptocurrency-related investment products.
“The Securities and Exchange Commission recently approved the listing of two Bitcoin futures funds on national exchanges but denied approval of Grayscale’s Bitcoin fund,” District Judge Neomi Rao said in an August statement, noting the inconsistency in the SEC’s decisions. As of now, the SEC has not officially commented on their decision, and a Grayscale spokesperson declined to comment until the SEC’s position is confirmed. The next steps in the SEC’s handling of Grayscale’s application remain unclear. The agency still has the authority to reject the application on different grounds, but Grayscale can also challenge these decisions in court.
Grayscale made its application in 2021
Grayscale first applied to convert its closed-end fund into an ETF in October 2021. Grayscale Bitcoin Trust (GBTC) is the largest cryptocurrency fund globally and has been trading at a discount to its Bitcoin holdings since February 2021. This discount reached almost 50% at one point but has since fallen back to around 17%. Grayscale has long argued that converting GBTC into an ETF would eliminate the discount and bridge the gap between the trust’s price and underlying Bitcoin. The structure of ETFs allows for a creation-redemption model that allows for the creation of new ETF shares to meet demand or their redemption to reduce supply.
Grayscale, a subsidiary of Digital Currency Group, is among several organizations that have filed for Bitcoin spot ETFs. Notably, BlackRock and Fidelity are also eagerly awaiting SEC approval for their ETF offerings. With the SEC’s decision not to appeal the court’s decision, the cryptocurrency community is now looking forward to the potential approval of Grayscale’s Bitcoin ETF, which could mark a significant milestone in the adoption of cryptocurrencies in traditional financial markets. Experts are optimistic that the SEC’s willingness to consider spot Bitcoin ETFs has increased significantly following this development.
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