Tech and Science

The first Bitcoin ETF could be launched soon as the court rules in Grayscale’s favor over the SEC

Nurphoto | Nurphoto | Getty Images

The District of Columbia Court of Appeals has paved the way for Bitcoin exchange-traded funds.

On Tuesday, the court joined Grayscale in a lawsuit against the Securities and Exchange Commission, which denied the company's application to convert the Grayscale Bitcoin Trust into an ETF. The decision could impact other companies looking to create Bitcoin ETFs, for example BlackRock and fidelity.

A spot bitcoin ETF allows investors to invest in the world's largest cryptocurrency without having to hold the actual token. Many crypto bulls believe that the approval of a spot bitcoin ETF will lead to more mainstream institutional acceptance.

Bitcoin, etherand other large cap crypto coins surged on the news, and Coinbasewhich is listed as a custodian partner in several spot bitcoin ETF filings, rose more than 14% on Tuesday.

Grayscale Investments, which manages the world's largest crypto fund, filed a lawsuit against the SEC in June 2022 after the agency denied its request to convert its flagship Bitcoin fund, better known by the ticker symbol GBTC, into an ETF. After the SEC approved ProShares futures-based Bitcoin ETF in October 2021, the company opted for the ETF that would be backed by Bitcoin rather than Bitcoin derivatives.

The ruling was delayed multiple times, but the SEC eventually denied the request last summer, arguing that Grayscale failed to answer questions related to concerns about market manipulation and investor protection.

A spokeswoman for Grayscale called Tuesday's ruling “a monumental step forward for American investors, the bitcoin ecosystem, and everyone who has championed bitcoin exposure through the added protections of the ETF shell.”

“Grayscale's team and our legal advisors are actively reviewing the details set forth in the Court's Opinion and will be pursuing next steps with the SEC. We will share more information as soon as possible,” the written statement said.

GBTC, which has $16 billion in assets under management as of Tuesday, became the first crypto product investors could trade through their brokerage accounts to gain exposure to Bitcoin. It was launched in 2013, long before Bitcoin ETFs were legal in Canada or Bitcoin futures ETFs in the US. Grayscale charges investors a 2% annual fee, making it a cash cow for parent company Digital Currency Group, led by Barry Silbert.

“It practically guarantees that they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to be resubmitted, but they will almost certainly be approved as well.”

Companies have been applying for spot Bitcoin ETFs for more than two years, but so far the SEC has rejected more than 30 proposals since 2021 — a 100% rejection rate. But investor sentiment improved in June when BlackRock, the world's largest wealth manager with around $9 trillion in assets under management, filed a filing. All but one of the company's 575 ETF applications to date have been accepted.

CNBC's Jordan Smith contributed to this report.

What Could an Approved Spot Bitcoin ETF Mean for the Crypto Industry?

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button