The U.S. Securities and Exchange Commission (SEC) is in discussions with Grayscale Investments regarding the specifics of the company’s request to transform its trust product GBTC into a spot bitcoin exchange-traded product (ETF), as per an individual familiar with the ongoing dialogue.
The outcome of these talks could have significant implications for the cryptocurrency industry.
The anticipation within the sector for the SEC’s approval of one or more ETF applications is palpable, marking a potential milestone that could facilitate the entry of everyday investors into digital assets. Following its legal victory, Grayscale has been in contact with both the SEC’s Division of Trading and Markets and the Division of Corporation Finance.
Both divisions of the SEC will play a crucial role in shaping and approving Grayscale’s ETF application.
While Grayscale has had an ongoing relationship with the SEC through its existing Grayscale Bitcoin Trust (GBTC), the agency previously denied its attempt to launch an ETF directly tied to crypto assets. This led to a federal court battle, concluding with the court finding the SEC’s rejection as “arbitrary and capricious” and ordering the agency to rescind its denial.
The court’s decision was finalized last month, returning the application to the regulatory spotlight.
Craig Salm, Grayscale’s chief legal officer, emphasized the current focus on constructive reengagement with the SEC’s Division of Trading and Markets. Salm acknowledged that there are still details to be worked through but expressed optimism, stating that progress is being made among other applicants for bitcoin ETFs, including financial giants BlackRock and Fidelity, in their talks with the SEC. He emphasized that it’s now a matter of “when,” not “if.”
While SEC Chair Gary Gensler declined to comment on the ongoing discussions, he previously mentioned that the commission is awaiting staff recommendations before deciding on the next steps for Grayscale’s application and others, according to The Block.
In the meantime, Gensler highlighted the significance of the agency’s corporation-finance arm in dealing with the challenges posed by “rapidly evolving technology and business models,” a central aspect of Grayscale’s ETF application.
