Takeaways
- Grayscale’s proposed bitcoin spot ETF failed to meet required standards to prevent manipulation and fraud, according to the SEC.
- Asset manager asks US Court of Appeals for review of SEC decision
The US Securities and Exchange Commission rejected a request by one of the largest managers of digital assets to convert their flagship Bitcoin trust into an ETF on Wednesday.
“We are deeply disappointed by and do not agree with its decision,” Grayscale Investments made the following statement on its site. Grayscale Investments said in a statement that the SEC actions were unjustified. “arbitrary and capricious.”
SEC rejected Bitwise’s request for a bitcoin spot ETF the same day.
The SEC denied Grayscale’s request to list a bitcoin spot ETF at the NYSE Arca on Wednesday. The regulator stated that the ETF proposal failed to comply with the regulatory standard intended to combat fraudulent and manipulative activities and protect both investors and the public.
Grayscale, which is challenging the SEC decision, has petitioned the US Court of Appeals District of Columbia Circuit for a review of the SEC decision.
SEC identified several possible sources of market manipulation, such as people in a position of dominance in bitcoin trying to manipulate the price of it. Other examples include hacks and trading platforms. “purported” Stablecoins play a key role in the ecosystem.
This is not an indication that the company disapproves of the product. “assessment of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment,” The SEC was added.
Grayscale first filed its application on October 2021 when the New York Stock Exchange granted approval for the bitcoin ETF to be traded. The first ETFs to go on the market were ProShares Valkyrie VanEck.
Futures-based ETFs allow investors to purchase or sell bitcoins at a set price as opposed to following the spot price.
Grayscale’s ETF spot was delayed as the regulator sought additional comments from the public. The SEC received more than 11,400 comments since November. According to Grayscale Asset Management, the majority of those letters supported Grayscale’s request.
Asset manager, in March, threatened the SEC with legal action for continuing to prevent a crypto-spot ETF. In June the firm tried to strengthen its legal department by hiring Donald B. Verrilli Jr. former US solicitor-general as a legal strategist.
“The SEC is failing to apply consistent treatment to similar investment vehicles and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934,” Verrilli stated in a press release.
Grayscale CEO Michael Sonnenshein, in an investor letter earlier this week expressed his optimism over the SEC’s imminent decision. In a letter to investors, Sonnenshein said that the SEC’s recent actions indicated an increasing recognition of and comfort in the bitcoin market.
Asset managers are expected to now assert that SEC should provide fair treatment for bitcoin ETF products. Bitcoin’s price has fallen by over 37% during the last one month. Blockworks Research shows the bellwether asset fell to below $20,000 by Wednesday morning, but recovered slightly at $20,074 before press time.
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