Grayscale is a leader in institutional bitcoin investing. At the end of June 2022, the company filed an application with the SEC for a Bitcoin ETF. But the policeman of the American stock exchange rejected the request. Grayscale has started legal proceedings to challenge the decision. The company tells us that the SEC has finally responded.
Grayscale vs SEC: Why is Bitcoin spot trading bothersome?
The SEC is the American authority that regulates stock market transactions, hence its nickname of stock market policeman. We are well aware of his fierce opposition to Bitcoin trading on the American stock exchange. On June 29, Grayscale wanted to become a Bitcoin ETF. The cryptocurrency giant filed a request with the stock market policeman to convert his Bitcoin trust into an ETF. But the SEC denied the request.
The SEC had then given some reasons related to the security and monitoring of bitcoin transactions. The organization believed that Grayscale had not given enough guarantees on securing funds and detecting fraud. Immediately after this denial, Grayscale commenced litigation and filed for review. The first response from the SEC came on December 10. We learned from the newspaper The Block that the SEC has filed its first legal filing. It comes two months after that of Grayscale, which was filed in court on October 11.
For Grayscale, this refusal is not explained, because the SEC has already authorized other ETFs such as ProShares Bitcoin Strategy ETF and Valkyrie Bitcoin Strategy ETF.
The consequences of the SEC’s refusal
Grayscale’s Bitcoin trust holds nearly $12 billion and manages funds for 850,000 clients. If the trust becomes a spot Bitcoin exchange-traded fund, approximately $4.5 billion in value would be unlocked. At the same time, it would force Grayscale to submit to stricter regulation.
Conclusion
The Grayscale vs. SEC case has only just begun. Maybe this company will finally bend the stock market policeman. He remains fiercely opposed to spot trading Bitcoin on the exchange. It would be a blow to lose to Grayscale. Remember that the Ripple vs SEC case may end in favor of the crypto business.
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