Grayscale has renewed a months-long push to persuade the Securities and Exchange Commission to approve converting the crypto investment firm’s $40 billion Bitcoin Trust into an exchange-traded fund (ETF).
ETFs bundle securities like stocks or commodities, and allow investors to buy shares of these bundles without owning the assets directly. There are two main types of Bitcoin ETFs: Bitcoin futures (derivative contracts that speculate on the price of the cryptocurrency), and Bitcoin spots (which operate on Bitcoin’s current price).
Grayscale is seeking to create the latter, a Bitcoin spot ETF. It would be the first of its kind: Though the SEC has thus far approved four Bitcoin futures ETFs, it hasn't approved a single Bitcoin spot ETF. (Neither Grayscale nor the SEC immediately responded to requests for comment from Decrypt. Grayscale did provide a copy of its letter on Monday.)
In a letter sent last week to the SEC, seen by the Financial Times, Grayscale’s attorneys argued that the manner in which the regulatory agency approved the fourth Bitcoin futures ETF, Teucrium, earlier this month, opened the door for a Bitcoin spot ETF.
Grayscale’s attorneys argued the point that the first three Bitcoin futures ETFs were approved by the SEC under the Investment Company Act of 1940. The Teucrium ETF, however, was approved under the Securities Act of 1933—a first. The SEC had previously stated that the 1940 act offered certain investor protections not covered by the 1933 act. The implication is that because Bitcoin spot ETFs couldn't be filed via the 1940 act, they offered insufficient investor protection.
Grayscale’s attorneys jumped on Teucrium’s approval via the 1933 act: “We believe the Teucrium order confirms the fundamental point ... [that] when it comes to approving [exchange traded products], there is no basis for treating spot bitcoin products differently from bitcoin futures products.”
The SEC likely will decide on Grayscale’s ETF application by July. Just weeks ago, Grayscale CEO Michael Sonnenshein stated he’d consider suing the SEC if the bid is rejected. Just after the Teucrium decision was released, Sonnenshein tweeted that when it comes to the alleged difference between Bitcoin futures ETFs and Bitcoin spot ETFS, the SEC “can no longer justifiably cite the ’40 act as being the differentiating factor.”
Therefore, if the SEC is comfortable with a #Bitcoin futures #ETF, they must also be comfortable with a spot Bitcoin ETF. And they can no longer justifiably cite the ‘40 Act as being the differentiating factor.
— Sonnenshein (@Sonnenshein) April 7, 2022