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Grayscale, an asset manager, in a fresh appeal has demanded to upgrade its Grayscale Bitcoin Trust into an exchange-traded fund (ETF) from the Securities Exchange Commission.
Davis Polk & Wardwell in a letter addressed to the agency on April 18, noted that the SEC should approve Grayscale’s own spot-based ETF product on the basis of its approval of the Teucrium Bitcoin Futures Fund recently.
The letter also stated that “there is no basis for treating spot Bitcoin products differently from Bitcoin futures products.”
Meanwhile, the approval of the agency on a spot ETF is also awaited. It cited concerns regarding market manipulation among exchanges that ease the spot bitcoin trade. Bitcoin futures is a US-based exchanges facilitator whose trade, comes under the regulation of the Commodities Futures Trading Commission.
Contrary to the Investment Act of 1940, the Teucrium product was approved under the Securities Exchange Act of 1934, which makes its approval quite notable. Grayscale would launch its ETF under the same framework.
A source said that the watchdog can’t leverage the difference between the ‘40 Act anymore, it’s the same act under which all prior futures were approved.
If the agency approves a futures-based fund under the ’34 Act but not a spot-one then the agency will be acting capricious and irrational, according to Grayscale.
The 1940 Act registration is not a basis for the Commission to reject one product but approve another, as confirmed with the Teucrium order, reads the letter.
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Since data compiled across spot exchanges works as the basis for the pricing for futures, Grayscale points out that a futures-based fund is not necessarily exposed to less risk than a spot fund.
The letter further points out that both spot and futures-based Bitcoin products are exposed to the same length in the Bitcoin market and naturally both the products will be affected in the same way in case of any fraud or manipulation in the underlying market. Therefore, the concerns regarding these risks can not justify the denying approve one product while approving another.
This summer, the agency will be making a decision on Grayscale’s application to upgrade GBTC. Michael Sonnenshein, the CEO of the firm has stated that all options including legal action against the SEC – are out there for launching its spot Bitcoin ETF.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
