Grayscale Investments at the NYSE, April 18, 2022.
Source: NYSE
The District of Columbia Court of Appeals has cleared the path for bitcoin exchange-traded funds (ETFs).
On Tuesday, the court ruled in favor of Grayscale in its lawsuit against the Securities and Exchange Commission (SEC). The SEC had previously denied Grayscale’s application to convert its Grayscale Bitcoin Trust into an ETF. This decision has potential implications for other companies looking to create bitcoin ETFs, such as BlackRock and Fidelity.
A spot bitcoin ETF would be traded on a traditional stock exchange, with the bitcoin held by a brokerage. This would allow investors to gain exposure to the world’s largest cryptocurrency without needing to own the coin themselves. Many cryptocurrency advocates believe that the approval of a spot bitcoin ETF will facilitate greater institutional adoption.
Bitcoin, ether, and other major cryptocurrencies experienced a surge in value following this news. Coinbase, listed as the custodian partner in multiple spot bitcoin ETF applications, saw its stock rise over 14% on Tuesday.
The court stated, “The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unequal regulatory treatment of similar products is unlawful.”
Grayscale Investments, which manages the largest crypto fund globally, initiated the lawsuit against the SEC in June 2022 after the agency rejected its application to convert its flagship bitcoin fund, known as GBTC, into an ETF. Grayscale decided to pursue the ETF, backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced several delays, but the SEC ultimately rejected the application last summer due to Grayscale’s failure to address concerns regarding market manipulation and investor protections.
The SEC stated in a response, “We are reviewing the court’s decision to determine next steps.”
A spokesperson for Grayscale called the ruling “a significant step forward for American investors, the Bitcoin ecosystem, and all those advocating for Bitcoin exposure through the added protections of the ETF wrapper.”
“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” stated the spokesperson.
GBTC, which currently has $16 billion in assets under management, was the first crypto product available for investors to trade in their brokerage accounts for bitcoin exposure. It was launched in 2013, well before the approval of bitcoin ETFs in Canada or bitcoin futures ETFs in the U.S. Grayscale charges investors a 2% annual fee, making it a profitable venture for its parent company Digital Currency Group, led by Barry Silbert.
“It virtually guarantees they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to refile, but they will almost certainly be approved as well.”
Firms have been applying for spot bitcoin ETFs for over two years, but the SEC has rejected over 30 proposals since 2021, resulting in a 100% rejection rate. However, investor sentiment improved in June when BlackRock, the world’s largest asset manager with $9 trillion in assets under management, submitted an application. The firm has had all but one of its previous 575 ETF applications accepted.
— CNBC’s Jordan Smith contributed to this report.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
