As the clock approaches midnight Eastern Time today, the U.S. Securities and Exchange Commission (SEC) is facing a crucial deadline to appeal a court order related to Grayscale Investments’ Bitcoin ETF application.
If the SEC takes no further action, Grayscale’s application for converting its Bitcoin Trust (GBTC) into a Bitcoin exchange-traded fund (ETF) will automatically be revived.
A Question of Regulatory Stance
45 days ago, the D.C. Circuit Court of Appeals issued a strongly worded ruling against the SEC’s initial rejection of Grayscale’s application.
The court criticized the SEC for treating spot Bitcoin ETFs differently from futures-based ETFs, describing the regulatory body’s decision as “arbitrary and capricious.” It is widely believed that the SEC will let the deadline pass, considering the court’s clear stance.
While the SEC’s next move is highly anticipated, the agency still has the authority to prolong the dispute by finding other flaws in Grayscale’s application, potentially causing further delays in introducing a mainstream Bitcoin investment product.
Grayscale and the Broader Industry Context
In October 2021, Grayscale submitted its application to convert its GBTC, which currently manages around $17 billion in assets, into a spot Bitcoin ETF. Other financial giants like BlackRock and Fidelity are also awaiting the SEC’s decision on their respective Bitcoin ETF applications.
“GBTC remains operationally ready to convert to an ETF upon appropriate regulatory approvals,” said Jennifer Rosenthal, a spokeswoman for Grayscale, last Friday.
The SEC’s decision will have a significant impact on market dynamics and investor participation. Even if the application is approved, there are still questions about when the first Bitcoin ETF product will become operational and who will launch it.
Approvals from the SEC involve multiple divisions within the agency. David Duong, head of institutional research at Coinbase Institutional, suggested that the markets have already factored in the eventual approval by the SEC.
As the SEC deliberates on Bitcoin ETFs, its decision goes beyond a single application or financial product. It could serve as a test to shape the agency’s broader approach to cryptocurrency regulation, potentially influencing the U.S. crypto market for years to come.
With other financial heavyweights like BlackRock and Fidelity also awaiting ETF approvals, the SEC’s next move could either open the doors for mainstream crypto investment options or act as a cautionary signal to the industry.