Grayscale Bitcoin ETF might not happen: SEC intercepts.

Grayscale has wanted to convert its Bitcoin fund into a Bitcoin ETF since 2016.
SEC has filed a case denying the conversion.
SEC filed a 73-page brief with the US Court of Appeals on December 9.

Everything is not going smoothly for Grayscale, as the United States Securities and Exchange Commission (SEC) is taking steps to stop the Grayscale Investments’ effort to launch their Bitcoin Exchange Traded Fund (ETF). Grayscale was in a legal battle with the SEC when the authority denied the investment product in June 2022.

SEC had filed a 73-page brief on December 9 with the US Court of Appeals, District of Columbia Circuit, where the commission laid out the reasons for their denial of Grayscale’s request for converting their Grayscale Bitcoin Trust (GBTC) into spot Bitcoin ETF.

The SEC is looking up to the D.C. Circuit for denial of Grayscale’s appeal, claiming the proposed funds are constitutionally different from futures ETFs, and the same has been proven in the past.

The denial from the SEC violated the Administrative Procedure Act. These are the guidelines through which American federal agencies issue and develop regulations. Here, the investment funds referred to the previous approvals by SEC, where they listed and traded BTC futures contracts.

To argue the point, SEC cleared that the previous approvals of the products only contained the futures contracts, which trade under the Chicago Mercantile Exchange (CME). At the same time, the exchange is a registrar of the Commodity Futures Trading Commission (CFTC), which operates under robust surveillance.

SEC strongly believes that the BTC spot market is unregulated and crippled compared to other vehicles of investments. And that Grayscale has failed to provide any supportive argument that CMEs’ supervision of futures trading could

“sufficiently detect and deter deceit and manipulation targeting the Bitcoin spot market.”

Grayscale still argues that the SEC failed to prove their difference in treatment of BTC future and spot BTC exchange-traded products. Grayscale said that this product could track BTC’s price more accurately and called the denial order harmful and discriminatory for the general investors.

GBTC has been operating since 2013 and offers authorized investors shares in the fund. The fund, thus invested in BTC, gives exposure to the investors in the form of security, omitting the need to acquire, store and manage Bitcoin.

Since 2016, Grayscale has been looking to convert the GBTC into ETF. They say the ETF shall provide broader access to Bitcoin, enhancing investor protection.

About Grayscale.

The Grayscale Investment LLC works under the umbrella of the crypto industry conglomerate Digital Currency Group (DCG). They are the world’s largest public holders of Bitcoin, with total holdings of 633,000 BTC. They have denied the recent trend of providing their users with Proof-of-Reserves (PoR), saying that,

“Due to security concerns we do not make such on-chain wallet information and confirmation information publicly available through cryptographic Proof-of-Reserves (PoR) or any other cryptographic accounting procedures.”

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing