Grayscale, a renowned cryptocurrency fund manager, has urged the U.S. Securities and Exchange Commission (SEC) to give simultaneous approval to all proposed spot Bitcoin exchange-traded funds (ETFs). This move is intended to prevent any single proposal from gaining an unfair advantage.
An Appeal for Fairness
On July 27, Craig Salm, Grayscale’s Chief Legal Officer, posted that their legal team had submitted a letter to the SEC. The letter addressed eight spot Bitcoin ETF filings, including Grayscale’s own, insisting that the SEC should avoid favoring particular applications. Instead, Grayscale urged a fair and orderly decision-making process.
Grayscale asserted that the SEC could base its approval of the spot ETFs on the approvals granted to Bitcoin futures ETFs, given that the two types of funds are “inextricably linked.”
Surveillance Sharing Agreements
The fund manager also responded to recent surveillance sharing agreements (SSAs) between Coinbase and the spot ETF providers, stating they were “not a new idea.” Grayscale went on to suggest that these SSAs would not meet the SEC’s standards.
In the case of recent ETF filings from Invesco, BlackRock, Valkyrie, VanEck, Wisdom, Fidelity, and ARK Invest, these had been updated to include SSAs with Coinbase. The purpose of the SSAs was for Coinbase to provide access to its trading books and other data, enabling the SEC to monitor for potential market manipulation or irregular trading activity.
Pushing Back Against SEC Concerns
Back in late June, the SEC delayed the ETFs on the grounds of there being no SSAs, citing concerns over potential market manipulation in crypto markets. However, Grayscale countered this argument. They asserted that the SSAs would neither satisfy nor be necessary under the SEC’s standards, given that Coinbase isn’t registered with the SEC as a securities exchange or broker-dealer, or with the Commodity Futures Trading Commission as a futures exchange.
Grayscale further expressed that the approval of the ETFs would mark “a positive but sudden and significant change” in the SEC’s application of its standard. They voiced concern that this could “improperly grant an unfairly discriminatory and prejudicial first-mover advantage to these proposals.”
A Nod to Grayscale Bitcoin Trust (GBTC) Investors
The Grayscale Bitcoin Trust (GBTC), which tracks Bitcoin’s price, has attracted nearly one million investors, as per Salm. He noted that converting it to an ETF would return billions in value to investors. Salm argued there’s “simply no reason” the SEC should exclude GBTC investors from a spot Bitcoin ETF.
However, it should be noted that the SEC denied Grayscale’s application to convert the GBTC to a spot Bitcoin ETF last June. In retaliation, Grayscale filed a lawsuit against the regulator, alleging inconsistent treatment of similar investment vehicles.
