Grayscale Notices Inconsistencies In the SEC’s Actions For Approving Spot Bitcoin ETFs

By Kevin • April 25, 2022 2:21 pm • Comments

Grayscale is known as one of the largest asset managers that have been persistent in trying to get a spot Bitcoin ETF approved by the SEC.

So far, it has not happened yet and the asset manager has noted down that the SEC’s actions have been somewhat inconsistent.

Right now, the only things that have been approved so far for listing are Bitcoin Future funds and the asset manager has made the statement that the basis on which the futures have been approved on can also be applied to Bitcoin spot ETFs as well.

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Essentially, Grayscale is making the point that there is no reason why spot ETFs and futures for digital assets should be treated differently.

TheBlockCrypto reports:

“We believe the Teucrium order confirms the fundamental point made in our November 29, 2021 letter in support of the above-referenced proposal: when it comes to approving ETPs, there is no basis for treating spot Bitcoin products differently from Bitcoin futures products,” the letter said.

The agency has yet to approve a spot ETF, citing concerns about market manipulation among exchanges that facilitate the trade of spot bitcoin.

Bitcoin futures, however, trade on US-based exchanges, which are under the regulator purview of the Commodities Futures Trading Commission.

Still, the approval of the Teucrium product is striking given it was approved under the Securities Exchange Act of 1934 — as opposed to the Investment Act of 1940.

The ’34 Act is the same framework under which would Grayscale would launch its ETF.

Grayscale also makes the very clear point that a futures fund doesn’t actually have less risk for investors compared to a spot ETF fund.

The statement was made based on analysis of prices and data that has been compiled across a variety of different exchanges.

As a result, the question still remains for investors and speculators why there has not been a single spot ETF fund for any kind of digital asset approved yet when it is clear that crypto is fastest growing market sector these days.

As part of Grayscale’s attempt to continue pushing for change, the asset manager has submitted the proposal to upgrade its GTBC fund to a spot ETF and will consider all possible actions to make this happen.

Uk.Investing.com reports:

“Both spot and futures-based Bitcoin products face exposure to the same underlying Bitcoin market, any fraud or manipulation in the underlying market will affect both products in the same way. […]

The existence of these risks therefore cannot serve as justification for denying approval to one product once approval for the other product has been granted.”

Davis Polk and Wardwell also wrote that the approval of Teucrium’s product is particularly notable since it was approved under the Securities Exchange Act of 1934 — as opposed to the Investment Act of 1940 — the same framework under which Grayscale hopes to launch its own ETF.

For this reason, the “SEC can’t use the distinctions between the ‘40 Act (which is what all prior futures ETFs were approved under) anymore.”

The approval for the first spot ETF fund for Bitcoin is likely to open up the gate for spot ETFs for all other prominent digital assets like XRP.

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