The U.S. Securities and Exchange Commission (SEC) has received some 200 letters, mainly from Grayscale investors, on the possible approval of Grayscale’s upcoming Bitcoin spot ETF, a decision that is still pending.
The SEC has received 198 letters on the topic of Grayscale’s spot ETF since October 2021. According to Bloomberg, the SEC has received over 184 letters from Grayscale investors just during the month of February so far. Last week the U.S. regulator issued a a public solicitation asking for their comments on Grayscale’s recent application and the potential Bitcoin spot ETFs present as a vehicle for fraud, after which the letters started flowing in.
An exchange-traded fund (ETF) is a basket of securities (in this case cryptocurrencies) tracking an underlying index. The public is free to buy shares of such funds in order to gain exposure to a given asset.
The letters on file are diverse and have been sent by individual citizens, anonymous commenters, engineers, financial advisors, attorneys, professors, and corporate leaders.
Some are in favor of Grayscale’s proposal, pointing out that a Bitcoin ETF would help grow the crypto market and create more regulated investment options. Others argue against it, even opposing cryptocurrency’s use in general.
The Chief Executive of Grayscale, Michael Sonnenshein, reached out to investors, encouraging them to send letters to the SEC concerning their fund’s conversion to an ETF. He said the investors have displayed an outpouring of support for the conversion thus far.
“For us, a lot of the letters have been echoing what we at Grayscale have been articulating for quite some time and continue to do so today — that investors have been patient and deserve a spot Bitcoin ETF.”
Why Is Bitcoin Spot ETF Important to GBTC?
Grayscale Bitcoin Trust (GBTC) is currently a trust fund. Under this format, share prices can’t be traded to accurately reflect market sentiment. As a result, the fund’s shares have traded at a discount to its underlying Bitcoin for close to a year.
Shares have declined 17% since 2022 began – compared to Bitcoin’s 13% slump. On Thursday, prices closed a whole 25% below the value of its BItcoin holdings
Grayscale investors can feel the pain. All of their letters to the SEC concerned the commission’s refusal to permit a Bitcoin spot ETF. Clay Craven, an investor, wrote:
“I don’t feel I’m being protected by the SEC. It’s past time for the SEC to approve the GBTC ETF conversion and stop harming investors and the country by outsourcing capital to foreign countries where spot BTC ETFs are already trading and approved by regulators.”
SEC Has Not Yet Approved Spot ETFs
The SEC has not yet approved a Bitcoin spot ETF and has repeatedly rejected applications with that goal. Most recently, it rejected applications from Fidelity, WisdomTree, and VanEck.
Aside from those who have commented to the SEC on their public forum, many others have expressed their views on the SEC’s apparent unwillingness to approve a Bitcoin spot ETF.
Minnesota Congressman Tom Emmer wrote a letter last November to the SEC. This week, SEC chair Gary Gensler responded, echoing concerns over fraud and manipulation previously mentioned by regulators. Gensler did, however, write that “careful consideration” would be given to Emmer’s points going forward.
We received a response from SEC Chair Gensler to our 11/3/21 letter regarding BTC spot ETFs. This issue remains a priority for us and we will continue to oversee the SEC in its mission to maintain fair and orderly markets and facilitate capital formation. pic.twitter.com/WbgSDj7o0T
Grayscale also has previously expressed its disapproval of the SEC rejecting Bitcoin spot ETFs, while approving futures ETFs. Despite this, the firm has not been prevented from launching other crypto-centered ETFs, such as its newly launched Future of Finance fund.
The SEC has also approved Bitcoin futures ETFs, but those funds do not track Bitcoin’s market value directly. As such, a Bitcoin spot ETF would be a major milestone for the crypto industry.
Investor protection is the primary concern SEC chairman Gary Gensler has cited when expressing a preference for Bitcoin futures ETFs over spot ones.
