Grayscale Urges Equal Treatment for All Spot Bitcoin ETF's in Letter to SEC

• Grayscale Investments said the U.S. Securities and Exchange Commission should approve all bitcoin exchange-traded fund application together, as approving only a few would give the winning applications an "unfair" advantage.
• Grayscale is locked in a months-long legal battle to have its own application to convert its trust product into an ETF.

The U.S. Securities and Exchange Commission (SEC) should approve all spot bitcoin exchange-traded fund (ETF) applications simultaneously if it approves any, to grant equal treatment to all applicants, Grayscale Investments said in a statement to the SEC on Thursday.

An approval of only the listed proposals, which include, Ark 21 Shares, Invesco Galaxy, iShares (BlackRock), Valkyrie, VanEck, WisdomTree and Wise Origin (Fidelity), would reflect a positive “but sudden and significant change in the Commission’s application of the relevant statutory standard, and as such would improperly grant an unfairly discriminatory and prejudicial first-mover advantage to these proposals,” said the statement.

However, the statement also suggested that these applicants’ work on a surveillance-sharing agreement with crypto exchange Coinbase may not meet the SEC’s requirements.

“Without disputing the usefulness of information obtainable under a surveillance-sharing agreement with a spot bitcoin trading venue,” Grayscale said, “we believe the Commission’s prior decisions have already determined that such an agreement with a venue lacking compulsory investigative authority and oversight by a comprehensive market regulator does not satisfy Section 6(b)(5) in the absence of a surveillance-sharing agreement with a market of significant size that, like the CME bitcoin futures market, the Commission deems sufficiently ‘regulated.’”

The SEC previously rejected Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into an ETF, but has approved a number of futures-based bitcoin ETFs. Grayscale filed a lawsuit against the SEC for denying the conversion in June last year. Grayscale is a subsidiary of Digital Currency Group, CoinDesk’s parent company.

Grayscale manages the world’s largest bitcoin fund, GBTC, which is a popular way for institutional investors to gain exposure to bitcoin without holding the asset directly. GBTC has long traded at a large discount to the underlying value of bitcoin, but it has recently seen this discount narrow following BlackRock’s application for a bitcoin spot ETF.

Last month saw a flurry of bitcoin spot ETF applications from large institutions such as BlackRock and VanEck.

“An approval that promotes investor protection and fairness for issuers should therefore be made simultaneously with approval of all proposed spot bitcoin ETPs, including those such as the Trust whose Rule 19b-4 filings were previously disapproved after lengthy Commission consideration,” said the statement.

If the SEC decides to change course and approve one or more of the above stated spot bitcoin ETF applications, “it must do so in a fair and orderly manner,” the statement said.

In a letter highlighting the statement’s points, Grayscale’s Chief Legal Officer Craig Salm said Grayscale does not believe an introduction of a surveillance-sharing agreement with a spot bitcoin market is or should be the “silver bullet” to gaining approval of a spot bitcoin ETF.