Eight months after Grayscale Investments initiated a lawsuit against the United States Securities and Exchange Commission (SEC) over rejecting its application for a spot Bitcoin (BTC) exchange-traded fund (ETF), the company’s CEO has commented on the regulator’s reasoning.
Indeed, Michael Sonnenshein, the CEO of the world’s largest cryptocurrency management firm, said that the main reason for the SEC still delaying the approval of a spot Bitcoin ETF was the perceived inability to fully regulate the underlying Bitcoin spot market, as he told CNBC’s ‘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.”
Quashing the regulator’s arguments
However, according to Sonnenshein, the agency’s arguments against the conversion of Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF hold no weight because the spot and futures markets are inevitably correlated and the futures crypto ETFs have already been approved by the regulator:
“At its core, the bedrock 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 tied. They have a 99.9% correlation, and so the actions of the SEC here are really arbitrary and capricious.”
That said, Grayscale’s boss believes that the case against the financial watchdog is going well, as he explained that the team had “walked away very encouraged” from the oral arguments presented on the day before and that “it’s 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 the Grayscale Bitcoin Trust “has been out there for nine years (…), publicly traded since 2015, SEC-reporting since 2020,” and “there is no new legislation required to bring GBTC further into the regulatory perimeter.”
In conclusion, Sonnenshein has expressed his opinion that the SEC should focus on doing “what it is supposed to do, which is protect the investors, and bringing [Bitcoin] into an ETF wrapper would further protect the investors.”
As a reminder, Grayscale has been working to develop the world’s biggest 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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