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Crypto Groups Mobilize Support for Grayscale Spot Bitcoin ETF Lawsuit Fight

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Three trade groups representing a broad interest in the crypto industry on Wednesday filed a court brief supporting a Grayscale Investments lawsuit against the Securities and Exchange Commission (SEC) for rejecting the company’s proposal for a spot Bitcoin exchange-traded fund (ETF).

The groups, which include the Blockchain Association, Chamber of Progress and Coin Center, and Chamber of Digital Commerce, filed the amicus brief in the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday. In their filing, the group argued that the SEC had firmly denied every application to list ETFs that hold Bitcoin, despite approving several ETPs holding Bitcoin derivatives.

The group stated that the SEC’s denial of Grayscale’s proposal to convert its flagship fund into an ETF violates the regulator’s procedures. The group explained that despite the approval of multiple futures-based Bitcoin ETPs, the SEC has abandoned its investor protection mandate and abused its authority by denying every application for a spot-based Bitcoin ETP, including Grayscale’s proposal.

The group said denying the applications is inconsistent with the Commission’s treatment of similar products and “cuts against SEC regulatory and policy imperatives” by depriving consumers of a product that clearly satisfies regulatory requirements for listing on a national securities exchange.

The groups argued that there is strong consumer demand in the U.S. for Bitcoin exposure and Bitcoin ETFs offer safe, transparent choices for investors. The group claimed that the SEC has applied a double standard in universally disapproving applications to list spot Bitcoin exchange-traded products.

Crypto firms such as Blockchain Capital, Chainalysis, Goldman Sachs, Binance.US, and Fidelity are also included in the membership lists of the Blockchain Association, Chamber of Progress and Coin Center, and the Chamber of Digital Commerce.

In June, the SEC rejected Grayscale’s application to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund, citing a failure by the investment manager to answer questions about concerns around market manipulation and lack of sufficient protections under the Grayscale proposal. Grayscale then filed a petition challenging the decision with the U.S. Court of Appeals for the District of Columbia Circuit.

Gemini Co-founder Marks Spot Bitcoin ETF Approval Struggle for A Decade

The 10-year anniversary of the day that Cameron Winklevoss and his brother Tyler filed for the top slot in the first Bitcoin Exchange-Traded Fund (ETF) was celebrated today by the co-founder of the cryptocurrency exchange Gemini. The businessman took the opportunity to lambast the Securities and Exchange Commission (SEC) of the United States for its ongoing refusal to approve such items. He claimed that this hesitation has proven to be harmful to American investors.

The Winklevoss brothers think that the SEC’s efforts have harmed investors more than they have helped them, especially by preventing them from investing in Bitcoin, the asset that has performed the best over the previous ten years.

The SEC’s opposition to approving Bitcoin ETFs, according to Cameron Winklevoss, has instead led investors to “toxic products” like the Grayscale Bitcoin Trust (GBTC). He emphasised the problems with GBTC, such as the enormous discount to Net Asset Value (NAV) and the extremely high fees.

Furthermore, he emphasised how this regulatory impasse has prompted spot Bitcoin activity to move overseas. Winklevoss claims that as a result, dangers for investors have increased because they are now dealing with unregistered and unregulated venues.

One significant result highlighted by Winklevoss was the fact that investors are now turning to platforms like FTX as a result of the SEC’s denial. He argues that because of this, they have been the victims of one of the biggest financial frauds in contemporary history.

Winklevoss urged the SEC to consider its record in a call to action. He advised the SEC to concentrate on carrying out its mandate rather than exceeding its statutory authority and serving as an economic life gatekeeper. This includes promoting fair and orderly markets, protecting investors, and assisting with capital development.

His concluding remarks showed his support for those who are still fighting for U.S. spot Bitcoin ETFs. It is evident that the Winklevoss brothers are still dedicated to their goal despite their ten-year battle, indicating a continuing difficulty for regulators.

Bitwise CIO Matt Hougan Discusses Amended Spot Bitcoin ETF Application

Key Takeaways

Matt Hougan, CIO of Bitwise, provides detailed insights via Twitter on the company’s amended spot Bitcoin ETF application.
Hougan focuses on the need to establish that the CME bitcoin futures market is the leader in price discovery.
The amended application is designed to address each of the SEC’s major objections to spot Bitcoin ETFs.

Matt Hougan’s In-Depth Twitter Commentary

Matt Hougan, the Chief Investment Officer at Bitwise, took to Twitter on September 25, 2023, to offer a comprehensive breakdown of the firm’s amended application for a spot Bitcoin ETF. In a detailed thread, Hougan stated that the amendment aims to “address, point by point, each of the major objections the SEC has raised in prior disapprovals for spot bitcoin ETFs.”

The Imperative of Proof

One of the critical points Hougan emphasized was the necessity of demonstrating that the CME bitcoin futures market is the leading force in price discovery over the spot market. He articulated, “We’re back to needing to prove that the CME bitcoin futures market leads price discovery over the spot market such that it can serve as a ‘regulated market of significant size’ for the purpose of surveillance.”

Academic Literature and Price Discovery

Hougan further delved into the academic aspect, stating that the amended application aims to “clear up the significant confusion around the growing body of academic literature on price discovery in the bitcoin market.” He was unequivocal in asserting that “every well-designed academic study supports the finding that the CME is ‘significant.'”

Regulatory Challenges and Surveillance

Hougan also touched upon the regulatory hurdles that Bitwise and other applicants face. While acknowledging that “surveillance sharing agreements with spot exchanges are positive,” he cautioned that these might “not satisfy the technical regulatory requirements” as stipulated by the SEC.

Bitwise’s Commitment to Research

Hougan used the Twitter thread to highlight Bitwise’s longstanding commitment to original research in their Bitcoin ETF filings. He cited the company’s 2019 research that aimed to uncover fake volume in the spot market and their 2021 white papers that sought to prove the CME futures market’s leading role in price discovery.

The Long Road to Approval

Hougan concluded his thread by reiterating Bitwise’s commitment to making a spot Bitcoin ETF a reality. He mentioned that the company has been working towards this goal for over five years and expressed gratitude towards others who have contributed to the cause.

SEC Extends Review Period for ARK 21Shares Bitcoin ETF

Key Takeaways

* The U.S. Securities and Exchange Commission (SEC) extends the review period for the ARK 21Shares Bitcoin ETF proposal till January 10, 2024.

* The delay follows the regulator’s previous postponement, pushing the decision 240 days post the initial application.

* This extension aligns with the SEC’s recent deferment on GlobalX’s Bitcoin ETF, amidst calls from U.S. Representatives for swifter approvals.

The Securities and Exchange Commission (SEC) has deferred the decision on the ARK 21Shares Bitcoin ETF application, extending the review period till January 10, 2024, as per the notice released on September 26, 2023. This move marks the second delay following the prior postponement on August 11, which had set November 11 as the decision deadline.

The ARK 21Shares proposal, aimed at listing a spot Bitcoin ETF on the Cboe BZX Exchange, has been under the SEC’s scrutiny since its filing on April 25, 2023. The regulatory body published the proposed rule change for public commentary on May 15, 2023, initiating a timeline for approval or disapproval.

Extended Review Period

The extension comes as the SEC invokes Section 19(b)(2) of the Securities Exchange Act of 1934, allowing for a 60-day extension beyond the initial 180-day review period. This provision facilitates the Commission in ensuring ample time for a thorough examination of the proposed rule change, especially as it underwent three amendments, with the latest being on July 11, 2023.

The regulatory body emphasizes the necessity of this elongated timeframe to adequately address the issues encapsulated in the amended proposal. This move resonates with the SEC’s similar postponement concerning GlobalX’s Bitcoin ETF offering, further accentuating the cautious approach adopted by the regulator towards cryptocurrency-based financial products.

Broader Regulatory Landscape

The SEC’s cautious stance unfolds amidst a broader call for expedited approvals. A faction of U.S. Representatives recently urged the SEC Chair, Gary Gensler, to accelerate the approval process for spot Bitcoin ETFs, criticizing the existing “inconsistent and discriminatory standards.”

Despite these pressures, the SEC continues to exhibit a meticulous approach, having not approved any spot BTC ETF listings on U.S. soil. The industry watches keenly as major firms like BlackRock, WisdomTree, and Fidelity await the SEC’s verdict on their respective ETF proposals, slated for review in October, with potential extensions leading into March.

Implications and Industry Response

The SEC’s decision prolongs a period of uncertainty for ARK 21Shares and other stakeholders keen on advancing Bitcoin ETF offerings. The delay also mirrors the regulatory hesitancy, keeping many in the industry and investors on edge as they await a favorable nod that could potentially unlock a significant capital influx into the cryptocurrency realm.

The regulatory trajectory also casts a spotlight on the SEC’s ongoing deliberation in assimilating crypto-based financial products within the conventional regulatory frameworks, a narrative that continues to evolve with the rapidly expanding digital asset ecosystem.

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BlackRock and SEC Discuss iShares Bitcoin Trust Listing on Nasdaq

On November 20, 2023, a critical meeting was held between the United States Securities and Exchange Commission (SEC) and representatives from BlackRock, Inc., and the Nasdaq Stock Market LLC. The meeting’s primary focus was the discussion of the iShares Bitcoin Trust and its potential listing on Nasdaq as a spot Bitcoin exchange-traded fund (ETF).

The SEC’s Division of Trading and Markets hosted the meeting, attended by key personnel including David Shillman, Tom McGowan, Randall Roy, Ray Lombardo, Molly Kim, Edward Cho, Sarah Schandler, and Stacia Sowerby. Representing BlackRock were Rachel Aguirre, Adithya Attawar, Shannon Ghia, Robert Mitchnick, Charles Park, Marisa Rolland, and Ben Tecmire. Additionally, Eun Ah Choi, Jonathan Cayne, Giang Bui, and Ali Doyle represented The NASDAQ Stock Market LLC.

BlackRock’s presentation to the SEC included a detailed exposition of two potential models for the iShares Bitcoin Trust: the “In-Kind Redemption Model” and the “In-Cash Redemption Model.” These models outlined the mechanics of how the ETF could operate, focusing on the redemption process involving market makers, bitcoin custodians, and various exchanges.

The In-Kind Redemption Model entails a process where the ETF issuer instructs the Bitcoin Custodian to release bitcoin to a market maker, who may then unwind the bitcoin position. This model involves various parties, including a U.S. Registered Broker/Dealer, spot crypto exchanges, and a listing exchange.

The In-Cash Redemption Model, on the other hand, involves the ETF issuer trading with the market maker to sell bitcoin for USD. This model includes additional steps involving the Bitcoin Custodian moving cash out of cold storage and the market maker delivering shares to the Transfer Agent via an Authorized Participant.

The SEC’s response to BlackRock’s presentation and proposed models remains unclear, with no information on whether the SEC plans to approve the listing of a spot Bitcoin ETF. The approval of such an ETF would represent a major milestone in the acceptance of cryptocurrency in mainstream financial markets.

This meeting comes amid ongoing reviews by the SEC of various proposals for spot crypto ETFs from several firms, including Fidelity, WisdomTree, Invesco Galaxy, Valkyrie, VanEck, and Bitwise, alongside BlackRock. The push for a spot Bitcoin ETF has seen several delays and denials, creating a sense of anticipation and uncertainty in the crypto and financial markets.

The SEC has also met with executives from Grayscale on the same day to discuss their proposal for a Bitcoin ETF. The meeting with BlackRock and the ongoing reviews indicate the SEC’s active engagement in understanding and potentially integrating cryptocurrencies into regulated financial products.

BlackRock’s application to list a spot Bitcoin ETF on the Nasdaq was initially filed in June 2023. The discussion around Bitcoin ETFs has been fueled by a 2019 video of SEC Chair Gary Gensler, where he criticized the commission’s “inconsistent” approach to Bitcoin products. The approval of a spot Bitcoin ETF by the SEC would be a landmark decision, potentially paving the way for wider acceptance and integration of cryptocurrencies in the mainstream financial sector.

SEC in Advanced Talks with Asset Managers for Spot Bitcoin ETF: BlackRock in the Spotlight

The launch of a spot Bitcoin exchange-traded fund (ETF) is a topic of active debate between the U.S. Securities and Exchange Commission (SEC) and a number of asset managers, notably the massive investment firm BlackRock. This action may be a crucial turning point in the acceptance of cryptocurrencies in traditional financial markets.

Chair Gary Gensler’s office representatives attended a recent round of discussions conducted by the SEC with asset managers who were considering the creation of a spot Bitcoin ETF in the United States. Representatives from BlackRock met with the SEC on December 14th to discuss a proposed rule change that would permit trading of the cryptocurrency investment vehicle on major exchanges. According to reports, BlackRock and the SEC are meeting for the third time to discuss the ETF application.

In recent weeks, asset managers and the SEC have had more intense talks. In addition to BlackRock, the SEC has spoken with representatives from Grayscale, Franklin Templeton, and Fidelity, among other significant companies. A variety of issues have been discussed in these talks, such as investor protection and market manipulation. However, special attention has been paid to the processes involved in creating currency, redeeming it, and obtaining spot Bitcoin from actual exchanges.

In the financial community, the approval of a spot Bitcoin ETF is much awaited. Several major asset managers, including Grayscale, Fidelity, Invesco, and WisdomTree, want to introduce their spot Bitcoin exchange-traded funds (ETFs). The ability to trade Bitcoin on Wall Street’s key exchanges would enable the cryptocurrency to reach a wider range of investors and greatly increase its credibility and acceptability in traditional finance, should the SEC approve these ETFs. However, there is a feeling of uncertainty over the result since the SEC’s approach to these products has been characterized by delays and denials in the past.

Differentiating between a spot and a futures Bitcoin exchange-traded fund (ETF) is crucial. A spot ETF holds actual Bitcoin at the current price, indicating its real-time tracking of the price. As opposed to owning the cryptocurrency itself, a futures exchange-traded fund (ETF) makes investments in Bitcoin futures contracts, gambling on the price of Bitcoin in the future. In 2021, the SEC authorized the first Bitcoin ETF with futures.

The interaction between BlackRock and the SEC has been very significant. BlackRock offered two possible redemption scenarios for its iShares Bitcoin Trust in an SEC memo: one that included in-kind transactions and the other that used cash. This demonstrates BlackRock’s dedication to negotiating the regulatory environment and providing a workable Bitcoin ETF solution.

There is growing conjecture that the SEC is getting closer to deciding whether to approve a spot Bitcoin exchange-traded fund. Given its potential to have a major influence on the market, investors and the cryptocurrency sector are eagerly watching the results of these discussions. The fact that Fidelity, WisdomTree, Invesco Galaxy, Valkyrie, VanEck, and Bitwise are among the other noteworthy candidates for spot crypto ETFs demonstrates the broad interest in this financial product.

The continuing debate for a spot Bitcoin ETF between the SEC and big asset managers like BlackRock is a significant turning point in the development of cryptocurrencies as a mainstream commodity. The SEC’s ruling, which is anticipated soon, has the potential to change the bitcoin investment environment and provide new opportunities for investor involvement in the digital asset market.