In response to Grayscale's recent legal victory against the agency, representatives from the company are currently addressing inquiries from two divisions within the SEC. The U.S. Securities and Exchange Commission (SEC) is currently engaged in discussions with Grayscale Investments regarding the specifics of the company's application to transform its trust product GBTC into an exchange traded product (ETF) for bitcoin.
Bitcoin Regulation
The crypto industry is eagerly anticipating the SEC's approval of spot Bitcoin ETF applications, which is seen as a significant milestone that could simplify the process for everyday investors to enter the digital asset market. According to an anonymous source, Grayscale has been in communication with both the SEC's Division of Trading and Markets and the Division of Corporation Finance since their legal victory. Both divisions would play a crucial role in shaping and approving Grayscale's ETF application. It's worth noting that Grayscale and CoinDesk are both subsidiaries of Digital Currency Group.
Grayscale vs the SEC
Grayscale's relationship with the SEC has been longstanding, primarily due to its existing Grayscale Bitcoin Trust (GBTC). However, when the company attempted to launch an spot Bitcoin ETF that would directly involve crypto assets, the agency rejected the proposal. This led to a legal battle in a U.S. federal court, where a panel of judges ultimately determined that the SEC's decision was "arbitrary and capricious." As a result, the court ordered the agency to retract its denial. The court's final decision was reached last month, effectively reinstating the application and placing it back under the regulator's review.
Craig Salm, Grayscale's chief legal officer, emphasized the company's current focus on reestablishing a constructive relationship with Trading and Markets. Although he did not provide further details on this engagement, Salm acknowledged that there are still unresolved matters. He also observed that other applicants for bitcoin ETFs, including financial powerhouses BlackRock and Fidelity, appear to be making progress in their discussions with the SEC regarding their own registrations. Salm expressed overall satisfaction with the engagement thus far, stating that it is now a matter of when, rather than if, the spot Bitcoin ETF will be approved.
The SEC declined to provide any comments regarding the new discussions, as stated by a spokesperson. When questioned about the future actions of the agency with regards to Grayscale's application and other similar ones, SEC Chair Gary Gensler refrained from answering until the commission receives recommendations from its staff. In the meantime, he released a video on Wednesday highlighting the efforts of the corporation-finance division of the agency, which is responsible for handling the impact of "rapidly evolving technology and business models" that are crucial to Grayscale's application.