Grayscale Investments needs the US Securities and Change Fee to know that the newest wave of potential spot bitcoin ETF issuers shouldn’t have an higher hand over the crypto-focused asset supervisor. 

Approving sure proposals earlier than others would give the primary funds an “unfairly discriminatory and prejudicial first-mover benefit,” a lawyer representing Grayscale wrote in a Thursday letter to the SEC. 

The corporate sued the US securities regulator final 12 months after the SEC denied its try to convert the Grayscale Bitcoin Belief (GBTC) to an ETF.  

Although the SEC has repeatedly blocked spot bitcoin ETFs from coming to market during the last decade, BlackRock’s software to launch such a product final month rejuvenated hopes for a lot of within the trade and spurred different companies to re-file for equally structured funds. 

Nasdaq, the trade on which BlackRock’s proposed spot bitcoin ETF can be listed, mentioned in an SEC submitting earlier this month that it “reached an settlement on phrases with Coinbase” to enter right into a surveillance-sharing settlement (SSA). 

The itemizing exchanges working with different fund teams on bitcoin ETF proposals, reminiscent of Cboe, added comparable language to their very own purposes.

Learn extra: How ‘surveillance-sharing’ is designed to discourage bitcoin ETF manipulation 

The opportunity of a surveillance-sharing settlement between a list trade and a spot bitcoin buying and selling venue is “not a brand new thought,” in keeping with a Thursday letter to the SEC by Joseph Corridor, accomplice at Davis Polk — a legislation agency representing Grayscale. 

Grayscale mentioned the viability of such a surveillance-sharing settlement with SEC workers in 2019, he added.

“The Fee is already able to approve spot bitcoin ETPs based mostly on the usual it has beforehand articulated, although a surveillance-sharing settlement with a spot bitcoin buying and selling venue in and of itself would neither fulfill nor be obligatory beneath that normal,” Corridor wrote.

The SEC is ready to approve spot bitcoin funds now as a result of it allowed bitcoin futures ETFs to launch, Grayscale Chief Authorized Officer Craig Salm mentioned in a weblog publish printed after the letter. Bitcoin’s spot and futures markets “are inextricably linked,” he added.

“Though we don’t consider the introduction of an SSA with a spot bitcoin market is or ought to be the ‘silver bullet’ to getting spot bitcoin ETFs accredited within the US…Grayscale continues to assist any effort that permits traders to entry the crypto ecosystem, and we applaud all progress that brings extra oversight to centralized crypto markets,” Salm wrote.

Simultaneous approval for all deliberate bitcoin ETFs? 

Grayscale helps the approval of all proposed spot bitcoin ETFs on the identical time, Corridor mentioned, noting that solely permitting the newest filers to launch “would mirror a optimistic however sudden and important change within the fee’s software of the related statutory normal.”

The letter notes that the primary merchandise to market would achieve an “unfairly discriminatory and prejudicial first-mover benefit” — alluding to the historical past of the primary ETFs to marketplace for a selected funding theme usually seeing the majority of investor belongings.

Whereas first-mover benefit has confirmed true throughout a spread of ETF classes over time, the youthful crypto-related fund area has largely confirmed that pattern. 

ProShares’ Bitcoin Technique ETF (BITO), the primary ETF within the US to carry bitcoin futures contracts, hit $1 billion in belongings beneath administration simply days after launching. The second such fund to launch — by fund group Valkyrie only a few days later — has simply $30 million in belongings. 

Grayscale will not be the one one rooting for the SEC to approve all spot bitcoin ETFs on the identical time. 

Matthew Sigel, VanEck’s head of digital belongings analysis, urged the SEC to “cease choosing winners” in a June Twitter thread. Bloomberg Intelligence analyst James Seyffart mentioned throughout an ETF Prime podcast earlier this month that letting BlackRock launch first, for instance, can be “a extremely unhealthy look.”

Trade watchers have famous that even when Grayscale wins its case in opposition to the SEC, that wouldn’t essentially imply it could instantly be capable of convert GBTC to an ETF. 

Dave Nadig, a monetary futurist at knowledge agency VettaFi, beforehand advised Blockworks that such a ruling might spur the SEC to disclaim GBTC’s conversion, and different spot bitcoin ETF purposes, by way of totally different reasoning. 

If new SEC steering spurs extra refiling efforts, the GBTC conversion might “lag new launches,” Nadig added on the time.


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