A Cryptocurrency asset management firm, Grayscale Investment LLC’s approach to transforming its $30 billion Bitcoin trust into an exchange-traded fund (ETF) could end up in a lawsuit against the SEC.
Securities and Exchange Commission’s(SEC) deadline to make the final decision on Grayscale’s application to convert the Grayscale Bitcoin Trust (use ticker GBTC) into a physically-backed ETF is July 6. Right now the SEC has not approved any spot ETF trading in the U.S.
One of the Grayscale officials stated that if SEC rejects their filing for physically-backed ETF, then they will respond in a legal manner and will consider a lawsuit as a part of the response.
“I think all options are on the table come July,” Grayscale CEO Michael Sonnenshein said in an interview with Bloomberg.
The arguments are purposefully aimed at the fact that the SEC has approved Bitcoin derivatives-backed ETFs for trading while rejecting Spot ETF applications.
Last year, three Bitcoin futures ETFs were rolled out just after getting a green signal from the SEC at the end of 2021. In October, ProShares launched the first bitcoin-backed ETF in the U.S.
In November, Attorneys at Davis Polk submitted a comment letter on behalf of Grayscale to the SEC that withstands the authority’s stance over spot Bitcoin ETF.
Furthermore, to give exposure to this legal fight with SEC, nearly 2,700 letters were submitted by investors as part of a standard 240-day review period, according to Grayscale.
Sonnenshein stated that it was “extremely encouraging” to see the support of inventors for their effort that emphasized the issue.
He affirmed that the absence of spot ETFs compelling investors to opt for future-based products as well as its flagship fund is not an ETF is a disservice to investors. He also highlighted GBTC trading under its net asset value of NAV.
“GBTC today has been traded since 2015 and it’s been an SEC-reporting company since January of 2020, so every single day that it is trading and being bought and sold by investors and is not being folded into the familiarity and the protections of an ETF wrapper, we really don’t feel that the SEC is doing everything they can to actually protect investors,” he said.
Currently, Grayscale Bitcoin Trust is trading at a 20% discount to the net asset value. Sonnenshein believes that the NAV and price of the fund should converge when the fund is eventually converted.
“It’s a matter of when, not a matter of if, a spot Bitcoin ETF is approved,” Sonnenshein said.
