Bitcoin ETF Conversion Sought by Grayscale
Bitcoin ETF discussions are advancing as Grayscale’s legal department sent a letter to the SEC on September 6th, requesting a meeting to discuss the conversion of the Grayscale Bitcoin Trust into an exchange-traded product (ETP).
High-ranking executives at Grayscale have intensified efforts by formally requesting a meeting to discuss their proposed spot Bitcoin ETF. This initiative follows a sequence of developments, including the SEC’s rejection in June 2022 of a proposed rule change that would have permitted Grayscale to launch its ETF offering.
Subsequently, Grayscale initiated legal proceedings to challenge the SEC’s decision, seeking a review of the ruling. On August 29, 2023, a court issued a verdict that could potentially compel the SEC to re-evaluate its application.
Further details can be found here.
Reports from the Wall Street Journal indicate that the SEC is presently examining this court order, with the possibility of appealing the ruling or once again denying Grayscale’s proposal among the considerations.
Recognizing that the ruling doesn’t guarantee approval, Grayscale sought to persuade the SEC to approve their proposal through their letter.
The full letter is available here.
They emphasized the similarities between their product and others as a basis for potential approval and argued that any further delays could adversely affect investors. Grayscale asserted that investors should not be obliged to invest in more intricate and less efficient product structures.
Furthermore, Grayscale commented on several other spot Bitcoin ETF applications currently before the SEC, contending that the SEC should refrain from imposing new regulations necessitating ETF applicants to establish surveillance-sharing agreements exclusively with Coinbase, aligning with other pending ETFs.
Instead, Grayscale advocated that a surveillance-sharing agreement with the Chicago Mercantile Exchange (CME), the exchange on which their product would be traded, should suffice.
Grayscale asserted that any grounds for rejecting the conversion, apart from the requirement within the Exchange Act that mandates rules to be “designed to prevent fraudulent and manipulative acts and practices.”
They expressed confidence that such reasons would have emerged in one of the fifteen Commission orders that rejected spot Bitcoin applications, even after the commencement of Bitcoin futures ETP trading.
Grayscale additionally pointed out that their fund conversion application has languished for nearly three times the duration outlined in the SEC’s regulations.
Joseph A. Hall, who also authored Grayscale’s letter in July advocating for the simultaneous approval of all pending ETF applications, concluded his recent communication by stating:
“We believe the Trust’s nearly one million investors deserve this fair playing field as quickly as possible.”
While the letter characterizes Grayscale’s intended investment instrument as an exchange-traded product (ETP), it is more frequently denoted as an exchange-traded fund (ETF), which represents a particular category within the broader classification of exchange-traded products.
