Manager receives official approval from Justice to launch Bitcoin ETF in US

The Federal Court of Appeal formalized the defeat this Monday (23). Securities and Exchange Commission (SEC) in the process against the management company Grayscale, which received official permission to create the first ETF (index fund) with direct exposure to bitcoins in the United States.

After that, it goes back to the SEC, which can no longer deny the request to convert the world’s largest bitcoin fund, GBTC, into an ETF.

The move follows a court ruling in August, when it overturned the SEC’s decision to reject Grayscale’s proposal, which Judge Naomi Rao said was “arbitrary and capricious” because the regulator failed to explain why it had approved similar products in the past. The SEC alleged that the bitcoin-based ETF did not have adequate controls to detect fraud.

“The Grayscale team looks forward to continuing to work constructively with the SEC to convert GBTC to an ETF,” said Grayscale spokeswoman Jennifer Rosenthal. “GBTC is ready to go and we intend to act as soon as possible on behalf of our investors.”

The ETF’s approval in the U.S. is seen as a potential watershed moment by digital asset advocates, who say greater access will lead to widespread acceptance of what critics have seen as a poorly regulated speculative niche.

Industry scandals and bankruptcies, such as the collapse of the FTX exchange, have helped cut the estimated value of the sector by more than half since the end of 2021, to around $1 trillion. Bitcoin is about half of the total.

Bitcoin climbed above $31,000 this Monday for the first time since July amid expectations that a US court ruling will help clear the way for BTC ETFs.


Hope for a new high

The crypto market is closely monitoring asset managers’ efforts to get ETFs approved. Bitcoin soared 10% last week, its highest since August, after fake news that BlackRock had received approval for its Bitcoin ETF. However, the price cooled after the manager said her request was still pending. BlackRock is among more than ten companies seeking to offer products in the US.

Earlier this month, the SEC decided not to appeal to an appeals court to reconsider its decision on shades of gray. The regulator does not intend to file further appeals in the case, a person familiar with the matter said at the time.

Cryptocurrency advocates applauded the High Court’s ruling, saying it would open up the industry’s ability to raise billions of dollars from ordinary investors and is a setback to President Gary Gensler’s crackdown on the crypto sector.

Grayscale said converting its trust into an ETF would allow it to easily make contributions and redemptions that are not possible today. The current closed structure prevents investors from buying back shares when prices fall, resulting in bitcoin trading at a deep discount to the market price.

Grayscale Bitcoin Trust’s discount has narrowed significantly in anticipation of the ETF conversion. On Thursday (19), Grayscale filed to list its trust’s shares on NYSE Arca, pending regulatory approval.


The likelihood and timing of “spot” ETF approvals remain in question. ETFs that invest in futures on Ethereum (ETH) — the second-largest cryptocurrency — debuted in the U.S. in October but have failed to gain traction, undermining arguments that adoption of the cryptocurrency will expand. Bitcoin Futures ETFs have been approved for 2021.

At around 6:15 p.m., Bitcoin was trading around $31,500, up 5.6% over the past 24 hours.

© 2023 Bloomberg LP

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