Grayscale CEO reveals why SEC continues to delay Bitcoin spot ETFs

Eight months after Grayscale Investments filed a lawsuit against the United States Securities and Exchange Commission (SEC) to reject its application for a spot Bitcoin (BTC) exchange-traded fund (ETF), the company’s CEO has commented on the regulator’s reasoning.

In fact, Michael Sonnenshein, CEO of the world’s largest cryptocurrency management firm, said the main reason the SEC continued to delay approval of a spot Bitcoin ETF was the perceived inability to fully regulate the underlying Bitcoin spot market, which he told CNBC ‘Squawk Box’ in an interview published on March 8.

As he explained:

“They say there is not enough of the ability to detect fraud and manipulation in the underlying Bitcoin spot market.”

Rejects the regulator’s arguments

However, according to Sonnenshein, the agency’s arguments against converting Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF have no weight because the spot and futures markets are inevitably correlated and the futures crypto-ETFs are already approved by the regulator:

“At its heart, the basis of this case is that the SEC has approved Bitcoin futures ETFs and continues to deny spot ETFs like GBTC. (…) But the Bitcoin futures market is a derivative of the spot market, so these are two markets that are inextricably linked. They have a 99.9% correlation, and so the actions of the SEC here are truly arbitrary and capricious.”

That said, Grayscale’s boss believes the case against the financial watchdog is going well, explaining that the team had “walked away very encouraged” from the oral arguments presented the day before and that “it has never been clearer – investors want access to Bitcoin through an ETF wrapper.”

Furthermore, he argued that there is no need for more regulation on this particular issue, as Grayscale Bitcoin Trust “has been out there for nine years (…), public since 2015, SEC reporting since 2020,” and “there is no new legislation is required to bring GBTC further into the regulatory realm.”

In conclusion, Sonnenshein expressed his opinion that the SEC should focus on doing “what it is supposed to do, which is to protect investors, and bring [Bitcoin] into an ETF wrapper would further protect investors.”

As a reminder, Grayscale has been working on developing the world’s largest investment vehicle for Bitcoin since 2013. In June 2022, Finbold reported that its legal team had filed a petition for review challenging the SEC’s decision to reject the firm’s spot Bitcoin ETF application.

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