Grayscale Argues for Approval of Spot Bitcoin ETF

Yesterday, the legal representative of Grayscale Bitcoin Trust submitted a comment letter to the Securities and Exchange Commission (SEC) expressing its support for the approval of spot Bitcoin Exchange-Traded Products (ETPs).

The SEC has previously rejected Grayscale’s application to convert its Bitcoin Trust into a spot ETF. Despite this, the SEC has approved other ETF futures products. Grayscale currently has a lawsuit filed against the SEC for failing to approve its ETF application.

What are spot ETPs or ETFs?

Spot Bitcoin ETPs are designed to hold Bitcoin directly, distinguishing them from ETFs investing in Bitcoin futures contracts. Although the SEC has previously approved rule changes for Bitcoin futures ETPs, no approval has been granted yet for spot Bitcoin ETFs.

What is Grayscale’s Argument?

The letter references recent Rule 19b-4 filings by various exchanges seeking approval for spot Bitcoin ETFs. These filings propose entering into “surveillance-sharing agreements” with Coinbase. However, since Bitcoin is not classified as a security or commodity future, Coinbase is not registered with the SEC or the Commodity Futures Trading Commission (CFTC) as an exchange or broker-dealer.

The prospect of surveillance-sharing agreements with Coinbase has generated optimism regarding the approval of spot Bitcoin ETFs. Grayscale’s letter highlights the importance of such ETPs in providing investors with broader access to the crypto market while maintaining regulatory oversight.

Grayscale also points out that the SEC’s approval of rule changes for Bitcoin futures ETFs sets a precedent that should be applied to spot Bitcoin ETFs as well. The correlation between the spot and futures markets for Bitcoin supports the notion that surveillance of the CME Bitcoin futures market, regulated by the CFTC, can effectively safeguard against fraud or manipulation in the spot Bitcoin market.

Will a Bitcoin Spot ETF be Approved This Year?

With BlackRock, the world’s largest asset manager, also filing for its own Bitcoin ETF, the race for spot Bitcoin ETF approval is gaining momentum. Grayscale’s advocacy and BlackRock’s entry into the market signal a growing interest in providing American investors with regulated and accessible crypto investment vehicles.

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The SEC’s decision on spot Bitcoin ETFs is eagerly awaited, as it has the potential to reshape the crypto market and open new opportunities for investors in the rapidly evolving digital asset space.