Ensuring Equitable Market: Grayscale Pushes for Concurrent SEC Approval of Bitcoin ETFs

• Grayscale, an established cryptocurrency fund manager, urges the U.S. Securities and Exchange Commission (SEC) to approve all Bitcoin ETFs concurrently to maintain a level playing field.
• Grayscale emphasizes that Surveillance Sharing Agreements (SSAs) between Coinbase and spot ETF providers may not meet SEC’s requirements, highlighting potential issues with market manipulation and irregular trading activity.

In a bid to ensure fairness in the rapidly evolving digital finance sector, Grayscale Investments, a leading crypto fund manager, has made a robust appeal to the Securities and Exchange Commission (SEC). Grayscale has proposed that the SEC should approve all pending spot Bitcoin exchange-traded fund (ETF) applications simultaneously, thus preventing any one entity from gaining a competitive edge.

The SEC should approve spot #bitcoin ETFs to trade in the US.
What’s more, their previous approval of bitcoin futures ETFs shows that they are already in a position to do so.
Read more about the latest from our legal team: https://t.co/UC8ksqNcwy $GBTC $BTC

— Grayscale (@Grayscale) July 27, 2023

The Push for Simultaneous Approval

In a letter penned by Grayscale’s Chief Legal Officer, Craig Salm, the firm addresses eight spot Bitcoin ETF filings, including its own. Salm opines that the SEC’s decision-making should not create “winners and losers,” but rather should facilitate an equitable and orderly marketplace.

The argument proposed by Grayscale suggests that the SEC’s approval for Bitcoin futures ETFs could be a roadmap for sanctioning spot ETFs, asserting the interconnectedness of the two fund types. This approach redefines the conventional perspective of treating these ETF types as distinct entities.

Grayscale has also brought attention to recent surveillance-sharing agreements (SSAs) formed between Coinbase, the prominent cryptocurrency exchange, and spot ETF providers. These agreements allow Coinbase to share information on its trading books and additional data, enabling the SEC to monitor any potential market manipulation or irregular trading activities.

However, Grayscale argues these SSAs might not adhere to SEC’s standards. The reason being that Coinbase isn’t a SEC-registered securities exchange or broker-dealer, nor is it recognized by the Commodity Futures Trading Commission as a futures exchange.

The firm further asserts that approving the ETFs would represent a sudden yet positive shift in the SEC’s standard application. However, it cautions that this could unfairly benefit initial movers in the space, thereby compromising the notion of fair competition.

The Grayscale Bitcoin Trust (GBTC), designed to track Bitcoin’s price, boasts nearly a million investors, according to Salm. If the Trust were converted to an ETF, it would deliver significant returns to these investors. Grayscale believes there’s no valid reason for the SEC to deny GBTC investors access to a spot Bitcoin ETF.

This call to action comes in the aftermath of the SEC’s refusal to grant Grayscale’s request to convert the GBTC into a spot Bitcoin ETF in June of last year, which led to Grayscale filing a lawsuit against the regulatory body, alleging inconsistent treatment of similar investment vehicles.