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Grayscale Investments is pushing back against the U.S. Securities and Exchange Commission after the regulator denied the firm’s bid to turn the world’s largest Bitcoin fund into an exchange-traded-fund.
The SEC stated in its decision that the company’s application to turn the Grayscale Bitcoin Trust into a spot Bitcoin ETF failed to answer the agency’s questions surrounding concerns about market manipulation.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GBTC | GRAYSCALE BITCOIN TRUST | 12.06 | -1.26 | -9.46% |
In addition to Grayscale, the SEC also rejected Bitwise’s application for a spot Bitcoin ETF on Wednesday and has previously rejected a slew of other proposals for spot Bitcoin ETFs, including from Fidelity and VanEck.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BITO | PROSHARES TRUST BITCOIN STRATEGY ETF | 11.61 | -0.87 | -6.97% |
| GCC | WISDOMTREE TRUST ENHANCED COMMODITY STRATEGY | 23.46 | -0.69 | -2.86% |
| BITQ | EXCHANGE TRADED CONCEPTS TRUST BITWISE CRYPTO INNOVATORS E | 5.55 | -0.30 | -5.13% |
However, the agency has given the green light to ETFs that offer exposure to Bitcoin but are not pure plays, including the ProShares Bitcoin Strategy ETF, WisdomTree’s Enhanced Commodity Strategy Fund and the Bitwise Crypto Industry Innovators ETF.
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Following the decision, Grayscale has filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit. Grayscale’s senior legal strategist Donald B. Verrilli Jr., a former U.S. solicitor general, and a team of attorneys at law firm Davis Polk & Wardwell are spearheading the company’s defense.
Representation of cryptocurrency and Gayscale logo displayed on a phone screen are seen in this illustration photo taken in Poland on Nov. 6, 2021. (Jakub Porzycki/NurPhoto via Getty Images / Getty Images)
The firm argues that the SEC has failed to apply consistent treatment to Bitcoin investment vehicles and is “acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”
“If regulators are comfortable with ETFs that hold derivatives of a given asset, they should logically be comfortable with ETFs that hold that same asset,” Grayscale said in a statement.
The SEC declined to comment beyond the decision on the application.
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On Wednesday, GBTC shares traded at an approximately 30% discount to its net asset value, representing approximately $8 billion of unrealized shareholder value. As of the time of publication on Thursday, GBTC has fallen 64% year to date.
“We hold firm in our belief that converting GBTC to a spot Bitcoin ETF remains the best option for investors,” Grayscale added. “It would effectively eliminate the discount and cause the shares to track the price of Bitcoin.”
The price of Bitcoin is currently trading above the $19,000 per coin level, well off its all-time high of $68,990.90 per coin hit last year. The total market capitalization of the global crypto market has fallen below $1 trillion, off its 2021 high of approximately $2.8 trillion.
