SEC Begins Deliberations with Grayscale Over Bitcoin ETF Conversion Application

Read about the strategic talks between Grayscale and the SEC over the transformation of GBTC into a Bitcoin ETF.

With insights from industry analysts and the implications of a recent court ruling favoring Grayscale, this article sheds light on the evolving landscape of cryptocurrency investment products and their regulatory journey.

Grayscale in Talks with SEC for Bitcoin Trust to ETF Transition

The U.S. Securities and Exchange Commission (SEC) has reportedly started discussions regarding Grayscale’s proposal to convert its Bitcoin Investment Trust (GBTC) into a physical Bitcoin Exchange-Traded Fund (ETF), based on internal sources.

Specifically, the SEC’s Division of Trading and Markets and the Division of Corporation Finance are conducting hearings with the cryptocurrency asset management firm Grayscale Investments, as revealed by anonymous sources.

Financial Giants in Line for Bitcoin ETF Approvals

Furthermore, Mr. Seyffart pointed out that applications for Bitcoin ETFs submitted by other financial institutions, including BlackRock and Fidelity, are also in progress.

He emphasized that the question is no longer if approvals are possible, but rather when they will be granted.

On the 4th of this month, Grayscale submitted documentation to the SEC, urgently requesting approval for the conversion to an ETF.

Potential Approval Window for Bitcoin ETF Applications

Bloomberg’s ETF analyst James Seyffart commented on the current status of the twelve applications under review, stating that "the twelve ETF listing applications, including Grayscale's, have a chance of being approved between November 8th and November 17th."

This is based on the fact that when the SEC extended the deadline for the ETFs under application, it set November 8th as the final day for counter-comments.

Moreover, the SEC may approve several ETFs between November 8th and November 17th, but it could also require all ETFs to begin trading on the same date.

Additionally, since the origin of Ark's ETF is around January 10th of the following year, "theoretically, the SEC could decide on the first nine applications at any point from now until January 10th, 2024," he noted.

Court Decision Favors Grayscale in August

In August of this year, a court decision regarding Grayscale's application to convert GBTC into an ETF appeared to favor Grayscale.

The presiding judge criticized the SEC for lacking a clear explanation as to why it approved futures-based ETFs while denying applications for physical Bitcoin ETFs, calling it "arbitrary and capricious."

Consequently, the judge ordered the SEC to revisit Grayscale’s application.

On October 23rd, a U.S. federal court formally ordered the SEC to reconsider, and prior to this, Grayscale had already applied for the conversion of GBTC to an ETF and listing on Arca.

Industry experts have suggested that the favorable ruling for Grayscale could positively influence future ETF applications.