U.S. SEC Delays Ruling on Grayscale’s Bitcoin ETF Application

The U.S. Securities and Exchange Commission (SEC) delayed making its decision on the pending application by Grayscale to convert its Bitcoin Trust into a spot ETF due to concerns of manipulation, liquidity, and transparency.

At no surprise, the SEC’s notice published on Friday didn’t bring anything out of the ordinary as it relates to the Grayscale’s pending application.

A call for “written submissions”

In its 10-page notice, the SEC specifically calls for “written comments” from “interested persons” from the general public to present their “views, data, and arguments” addressing the regulator’s previous concerns of market fraud, manipulation, and overall lack of transparency.

The notice goes on to state that the public has 21 days from today, as noted in the Federal Register, to come forward with written data, views, and arguments on whether or not Grayscale’s application should be approved or disapproved – with an opportunity for rebuttal to any particular submission to be made within 35 days from today.

For individuals interested in submitting their comments to the SEC, the notice affords the public a means to submit electronically or by paper.

Those wishing to submit their comments electronically, are asked to use the SEC’s “Internet comment form” or send an email to [email protected] with the subject line “File Number SR-NYSEArca-2021-90.”

Those wishing to submit their comments by mail should send multiple copies to “Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.

SEC’s precedent for rejecting spot ETF applications

Last October, Grayscale, the world’s largest digital asset manager, filed its application to convert shares of its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF, hoping to turn the tides on the regulator’s historical pattern of rejecting BTC spot ETF applications.

Unfortunately, two months later, the SEC announced that it would be postponing its decision on Grayscale’s application, citing concerns of market fraud, manipulation, and transparency as its main points of contention. Per its recent tweet, Grayscale has $36.5 billion in assets under management as of Feb. 4 per a tweet, with its GBTC product accounting for over 71% of its total assets.

Fidelity and SkyBridge

At the end of January, the SEC similarly rejected Fidelity’s Wise Origin Bitcoin Trust, coming just seven days after it had rejected a spot bitcoin ETF proposal from First Trust and SkyBridge Capital.

Interestingly, in its rejection of Fidelity, the SEC spoke in-depth on surveillance-sharing agreements and its obligations of ensuring exchanges meet their obligations under the Exchange Act.

It’s worth mentioning that in October of the same year, the SEC approved ProShares Bitcoin Strategy ETF – the first Bitcoin futures fund to be approved in the United States, followed by a pair of Strategy ETFs from Valkyrie and VanEck.

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