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Grayscale Investments, a major player in cryptocurrency asset management, is pushing the U.S. Securities and Exchange Commission (SEC) to act swiftly on its request to convert its primary Bitcoin fund into a spot exchange-traded fund (ETF). This follows a significant court ruling on August 29 where a U.S. Appeals Court sided with Grayscale, disagreeing with the SEC's earlier refusal to allow the conversion of the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.
On September 5, lawyers representing Grayscale sent a formal correspondence to the SEC, urging a meeting to talk through the upcoming steps. This came after the SEC had suffered a legal setback concerning the GBTC conversion issue. Grayscale asserted that the SEC should no longer have any reason to treat GBTC differently from Bitcoin futures ETFs, which the agency has previously accepted.
In the letter, Grayscale emphasized that if the SEC had any other concerns about the conversion other than compliance with the Exchange Act's mandates against fraudulent and manipulative conduct, such issues would have come up by now. The asset manager noted that its application for fund conversion has been in the pipeline far longer than the SEC's own rulebook suggests is acceptable.
Grayscale indicated that the ruling by the Appeals Court removed any remaining legal impediments to blocking the conversion of the GBTC to a spot ETF. They stressed that there's now a lack of legal justification to differentiate a Bitcoin futures ETF from a spot Bitcoin ETF.
Joseph A. Hall, the lawyer who wrote the latest letter as well as an earlier one in July, finished off by emphasizing the urgency for the SEC to act. He said the almost one million investors in the Trust should be given a level playing field without unnecessary delays.
Notably, since the court ruling on August 29, GBTC's discount rate— an indicator that compares how closely an ETF's trading price aligns with its actual asset value—has improved. It dropped to 20% after hovering close to negative 50% in December 2022, a period marked by the FTX market crash.
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