The SEC doubles its decision to reject Grayscale Spot ETF

The Securities and Exchange Commission doubled her decision last week to reject Grayscal's offer to the introduction of a Bitcoin ETF, and repeated their attitude that such products are susceptible to fraud and manipulation, as court files show.

Grayscale had claimed in summer that the SEC would unfairly measured with two levels by allowing Bitcoin-Futures-ETFs on the market and repeatedly rejects suggestions for ETFs that invest in spot bitcoin.

In June, the SEC rejected Grayscale's proposal to convert his Bitcoin Trust into an ETF. Later on this day, Grayscale sued the supervisory authority and claimed that the Commission had violated the Administrative Procedure Act and the 1934 Securities Studies Act by discriminating against "arbitrary and moody" base between issuers of the two types of ETFs.

In October 2021, the Proshares Bitcoin Strategy ETF became the first Bitcoin Futures ETF. According to the CFRA's ETF database, the fund on December 9 had a fortune of $ 575 million. Other Bitcoin futures ETFs on the market are the $ 20 million Valkyrie Bitcoin Strategy ETF and the $ 21 million Vaneck Bitcoin Strategy Etf.

The answer letter that was submitted last week is the first answer of the SEC to Grayscale's lawsuit. In it, the Commission confirmed its attitude that it had approved Bitcoin futures ETFs because they are closely monitored by Chicago Mercantile Exchange. Spot-Bitcoin ETFs, on the other hand, lack this measure of state supervision, the letter says.

nyse arca, where Grayscale wishes to list his ETF, claims that the index that its proposed spot bitcoin ETF would use to use an advanced algorithm to reduce fraud, manipulation and other anomal trading activities. However, the SEC argues that these provisions are not sufficiently effective, as its short answer shows. In addition, Bitcoin is an unregulated cash market without adequate surveillance, the Commission stated.

"The SEC has been consistent in its conviction that a futures-based Bitcoin ETF is permitted, but a spot-based not one, as there was a risk of fraud and manipulation," said Todd Rosenbluth, research manager at Vettafi. "Grayscale has to cope with a high load, sometimes because the SEC has blocked every ETF several times than there was a wave of submissions under the current leadership."

The SEC rejected applications for Bitcoin ETFs from a number of companies, including Wisdomtree, Fidelity and Vaneck.

The SEC also argued that Bitcoin futures ETFs and spot bitcoin ETFs should be treated differently because they represent different risks for investors. The Commission requested the Court of Appeal in Washington, DC, in which the case was submitted, to confirm his view that it was reasonable when Grayscale's plans for converting his Bitcoin Trust, wrote the supervisory authority.

The US Chamber of Commerce, NYSE Arca, Coinbase and the Blockchain Association expressed their support for Grayscale's lawsuit and in October Amicus briefs, in which it is argued that Bitcoin Futures ETFS are more risky than the proposed spot bitcoin ETFs.

"Coinbase is committed to the value of the market monitoring of the private sector, which is voluntarily adopted by unregulated spolly spot trade platforms, and claims that" the biggest actors on the Bitcoin market "have the best interests of investors in mind," wrote the Congress under the premise that voluntary regulation did not always sufficient. "

The SEC creates an "uneven field" by approving Bitcoin-Futures-based ETFs and continuously refusing spot-bitcoin ETFs, and this disadvantage the shareholders of Bitcoin Trust, said Grayscale in a statement that was published last week on its website.

Grayscale and his lawyer at Davis Polk did not answer inquiries about comments.

The regulatory authority also keeps spot bitcoin on a higher standard than futures contracts without articulating a "solid basis for this decision", said Grayscale. Since the collapse of FTX on November 8th, the Coindesk Bitcoin Prize Index, which the Spot-Bitcoin ETF from Grayscale would have followed, has a very similar price to the Bitcoin Futures index at the Chicago Mercantile Exchange, said that in Stamford, Connecticut.

Aniket Ullal, head of ETF data and analyzes at CFRA Research, said

Bitcoin futures ETFs recently. According to CFRA data, the cash price of Bitcoin and the Proshares Bitcoin Strategy ETF have both negatively profitable by December 9th.

Despite Bitcoin's massive loss of value, the seven Bitcoin Futures ETFs on the market, according to CFRA, attracted a net inflow of $ 338 million in the year until December 9th. At this point in time, the ETFs had a fortune of $ 723 million, as the database shows.

"This number is meaningful in these products in relation to the current asset base, but very low compared to the overall inflows in US ETFs," he said.

A total of $ 6.8 trillion US ETF market, according to Morningstar Direct, recorded net inflows of $ 544 billion in the previous course of the year until November 30th.

"Crypto investors are calling for more regulated options," said Grayscale. "It is time for the SEC to respond to this call."

The company has time until January 13th to respond to the short letter from the SEC, which is apparent from court files.

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