Grayscale urges the SEC to take action as bitcoin’s rally fades
A lawyer employed by Grayscale Investments asked to meet with the Securities and Exchange Commission “as soon as possible” in a letter on Tuesday that urged the regulator to approve the conversion of Grayscale’s Bitcoin fund into a Bitcoin spot fund.
The attorney from Davis Polk & Wardwell LLP asked for the meeting to “discuss the way forward” after the crucial decision by a three-judge panel of the District of Columbia Court of Appeals for the District of Columbia last month injected a new wave of optimism into the cryptocurrency markets.
The justices concluded that the SEC was “arbitrary and capricious” when it denied Grayscale’s conversion request in 2022 after previously approving ETF products holding bitcoin futures.
A bitcoin exchange-traded fund would allow investors exposure to the world’s largest cryptocurrency without having to own it, potentially broadening mainstream acceptance of the digital asset.
In the hours following the court’s decision, bitcoin rose 8% and briefly touched $28,000. But within 48 hours, Bitcoin (BTC-USD) regained those gains and the rally quickly faded.
Over the past 24 hours, bitcoin has fallen slightly, trading below $26,000 on Tuesday afternoon. It fell by 1% over the past week.
There is no guarantee that the SEC will act in a manner favorable to Grayscale following the court’s ruling, which only requires the SEC to review, not approve, Grayscale’s application. The SEC has until mid-October to request a reconsideration of the case. She is reviewing the decision.
“We shouldn’t be too excited, or too excited,” Rick Edelman, founder of the Digital Asset Council for Financial Professionals, told Yahoo Finance on Tuesday. “The court did not order the SEC to approve these ETFs. The court merely said that its denial of Grayscale’s application was inappropriate.”
“We have to be patient a little bit,” Grayscale CEO Michael Sonnenstein said last week in an interview with Yahoo Finance.
A letter on Tuesday from his company’s lawyer sought more urgency, arguing that any further delay would hurt investors.
“We believe the nearly 1 million investors in the fund deserve this fair playing field ASAP,” writes Joseph Hall of Davis Polk.
Grayscale Bitcoin Trust (GBTC) is the world’s largest bitcoin trust holder. It is trading at an 18% discount to the performance of Bitcoin, according to YCharts.
Edelman said the SEC could approve the Grayscale ETF application, make another argument as to why it did not approve the application, or even cancel the listings of Bitcoin futures ETFs that it has already approved.
He added that the cancellation of existing futures ETF products “would be shocking,” noting that “no one expected this.”
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