Crypto hedge fund Grayscale tells the US Securities and Exchange Commission (SEC) that its rejection of Bitcoin (BTC) exchange-traded funds (ETFs) is “illogical”.
In a response to a brief filed by the SEC last month, Grayscale said converting the Grayscale Bitcoin Trust (GBTC) into an on-site BTC ETF would greatly benefit traders by unlocking value and increasing investor protection.
“For more than 850,000 investors, the conversion of GBTC to bitcoin ETF points will unlock more than $4 billion in value by providing the regulatory relief needed to create and redeem shares for the product simultaneously, thereby enabling arbitrage to address both share premiums and and discounts. compared to net asset value.
This conversion will also subject GBTC trading to heightened regulatory standards and increase investor protection. The SEC’s reluctance to further bring Bitcoin into the regulatory loop through Bitcoin ETFs has prevented US investors from gaining the Bitcoin investment exposure they both want and deserve.
Grayscale first sued the SEC in June 2022. In an October 2022 filing, the company alleged that the regulatory agency showed bias when it rejected a hedge fund’s application for a Bitcoin ETF in June.
In the lawsuit, Grayscale argues that the SEC’s approval of other BTC-related products, such as the Chicago Mercantile Exchange (CME) BTC futures ETF, is inconsistent with its rejection of Bitcoin ETFs.
In the official lawsuit, Grayscale refers to the SEC’s decision to grant CME a futures BTC ETF based on its level of security as “illogical” because the same type of security would be needed to launch a BTC ETF.
“The order in this case is essentially arbitrary. Its central premise, that the exchange control sharing agreement with the CME provides adequate protection against fraud and manipulation in the bitcoin futures market but not in the bitcoin bitcoin market, is illogical.
Any fraud or manipulation in the spot market will necessarily affect the price of Bitcoin futures, thereby affecting the net asset value of the ETP. [exchang-traded product] holding bitcoin or bitcoin futures, and the price investors pay for shares of such ETP”.
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