On June 30, SEC decided to deny Grayscale’s proposal to convert Bitcoin Trust (GBTC) into Bitcoin ETF after many renewals, as well as rejecting Bitwise’s spot Bitcoin ETF proposal. As such, SEC has yet to authorize the listing of Bitcoin spot ETF, although recently Grayscale revealed progress in meetings with the SEC.
In the denial, SEC mentioned market risks that Bitcoin cannot manage, including wash trading, “whales” manipulating the market, hacking and security issues on exchanges, risks from stablecoins like USDT, frauds/scams on major Bitcoin exchanges, etc.
SEC said:
“This order disapproves the proposed rule change, as modified by Amendment No. 1. The Commission concludes that NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), which requires, in relevant part, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”
For its part, Grayscale stated that it disagreed with the SEC’s ruling and sued the U.S. Securities and Exchange Commission. Accordingly, the lawsuit was filed in the Washington DC Court of Appeals.
SEC Chairman Gary Gensler has repeatedly stated that he will not approve the spot Bitcoin ETF because there hasn’t been any law governing cryptocurrency, while the futures Bitcoin ETF is accepted because the futures derivative products have Commodity Futures Trading Commission (CFTC) management. Gensler also served as Chairman of the CFTC from 2009 to 2014.
Previously, Grayscale had prepared to go through an agreement with Jane Street and Virtu to close the GBTC discount if approved by the SEC. The firm also added that it has contemplated all possible scenarios as well as ramped up legal resources for unexpected endings.
Grayscale said the conversion of its Bitcoin fund into Bitcoin ETF will protect investors, allowing tracking products better than the actual value of BTC while still having the freedom to invest in Bitcoin securely and safely.
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