By Brenda Collins
The latest update coming from one of the Securities and Exchange Commission (SEC)’s latest court cases says that the commission is under fire from judges for turning down Grayscale’s application to launch an exchange-traded fund for bitcoin (ETF). Judges are challenging the SEC’s excuse for rejecting the application as Grayscale’s legal action against the SEC proceeds.
According to the report, the SEC’s Senior Counsel, Emily Parise, claimed during the hearing that Grayscale’s application lacked the information needed to ascertain whether fraud and manipulation in the spot market had a similar effect on futures markets. Recall that the SEC has previously expressed worries that the Bitcoin spot market is prone to manipulation.
On the other hand, the organization has been unwilling to approve a Bitcoin ETF unless it is confident that the market is adequately regulated and free from manipulation. The story also had it that Don Verrilli, a former US solicitor general, argued on behalf of Grayscale that the SEC’s decision conflicted with earlier rulings that had authorized trading in futures-based ETFs in the US.
Verrilli was reported to have claimed the SEC’s refusal was arbitrarily and carelessly made. He charged the organization with altering its criteria for certifying ETFs without giving appropriate notice or providing a valid reason.
Grayscale Bitcoin Trust (GBTC) and Their Operations
The Grayscale Bitcoin Trust (GBTC), a product offered by Grayscale, the most significant asset manager of digital currencies in the world, enables investors to obtain exposure to Bitcoin without having to purchase and hold the cryptocurrency themselves.
Each share of GBTC is valued according to the value of the underlying Bitcoin assets, which GBTC manages on behalf of its investors. To the underlying value of the Bitcoin that Grayscale is holding in its trust, however, shares in GBTC are currently trading at a considerable discount.
Also read:This is partially caused by the way the product is designed, which forbids the exchange of shares for Bitcoin. From investigations gathered so far on the operations of this company, in a situation where the investors want to withdraw their money from GBTC, they must sell their shares on the open market, which can lower the share price in comparison to the underlying Bitcoin.
The difference between the price of GBTC shares and the actual worth of the Bitcoin held by Grayscale, according to many investors, could be reduced if a Bitcoin ETF is approved. It was also revealed that investors could purchase and sell Bitcoin directly through their brokerage accounts using a Bitcoin ETF, avoiding complications.
Previous Efforts by the SEC
Further information gathered on this case says to prevent a situation where the whole system is prone to the market’s volatility and vulnerability to manipulation, the SEC has been reluctant to approve a Bitcoin ETF. The lack of investor protection in the world of digital currencies, as well as the possibility of fraud and market manipulation, have also raised worries for the agency.
In the upcoming months, the judges presiding over Grayscale’s complaint against the SEC are anticipated to make a decision. It might be possible for a Bitcoin ETF to be approved in the US if the judges find it in favor of Grayscale. It would be much simpler for investors to get exposure to Bitcoin and other cryptocurrencies, which would be a huge breakthrough for the digital currency market.
Institutional investors and traditional financial organizations have recently shown a growing interest in digital currencies. Since they provide faster, more cost-effective, and more secure transactions than conventional payment methods, many experts feel that digital currencies have the potential to transform the financial sector.
Experts and stakeholders familiar with the situation believe that there wouldn’t be a need to rush the whole process; there are many issues that need to be resolved before the technology can realize its full potential because the digital currency market is still largely untested and new.
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