SEC seeks public feedback on Grayscale’s BTC spot ETF application

Getting your Trinity Audio player ready...

The U.S. securities watchdog has again delayed its decision on a BTC spot exchange-traded fund (ETF) application by institutional digital asset investment service provider Grayscale. The regulator is seeking public feedback on the application which was first filed in October last year.

In its notice, the U.S. Securities and Exchange Commission (SEC) acknowledged that NYSE Arca, Inc. filed an application on October 19, 2021, to list shares of the Grayscale Bitcoin Trust. In December, the regulator announced that it was postponing its decision.

And now, the SEC is requesting for public feedback on the ETF application, which seeks to convert shares of the Grayscale Bitcoin Trust (GBTC) into a spot ETF, the first of its kind in the U.S. market.

In particular, the regulator wants the public feedback on whether the BTC spot ETF would be susceptible to manipulation and if Grayscale has put enough measures to prevent this.

It’s also seeking feedback on whether there’s enough liquidity and transparency in the digital asset markets, saying: “The bitcoin markets’ susceptibility to manipulation, and thus the suitability of bitcoin as an underlying asset for an exchange-traded product?”

The SEC also wants to know whether there are enough safeguards in place to protect investors and the public interest. In its application, Grayscale had asserted that there isn’t significant lead or lag between the proposed spot ETF and the existing futures ETFs, an assertion that the SEC wants feedback on.

The watchdog has been unmoved in its opposition to a BTC spot ETF, despite approving the first-ever BTC futures ETF, the ProShares Bitcoin Strategy ETF (BITO) which launched in October last year. Shortly after, it approved two more futures ETFs, and the three have seen quite some success on the U.S. market.

However, the SEC refuses to approve a spot ETF, claiming that such an ETF would be more prone to manipulation and fraud and insisting that there aren’t enough safeguards for the investors.

Grayscale, which has about $36.5 billion in digital assets under management, has been on the frontline in the race to become the first BTC spot ETF provider.

In early December, the company, owned by the Mastercard-linked Digital Currency Group, wrote a letter in which it accused the SEC of breaking the law for not approving the spot ETF. Grayscale claimed that if the SEC would have turned down all BTC ETFs, whether futures or spot, then the firm wouldn’t have had an issue with the watchdog.

Now that bitcoin futures ETFs are live, the SEC has no valid justification for denying @Grayscale's spot ETF application. The Administrative Procedures Act demands approval. It's time.

Last night, @blockchainassn filed a letter in support of the spot ETF. Read our views here: https://t.co/pEYbZK5wqz

— Jake Chervinsky (@jchervinsky) November 30, 2021

However, approving one set and turning down the other was against the U.S. laws, according to Grayscale, which noted that the law requires the watchdog “to treat like situations alike absent a reasonable basis for different treatment. This means the SEC must treat similarly situated investment products similarly.”

Watch: SEC Commissioner Hester Peirce on Bitcoin Association’s Blockchain Policy Matters