SEC Can Target Crypto Custodians After Grayscale Victory

SEC Can Target Crypto Custodians After Grayscale Victory

On Tuesday, August 29, Grayscale registered a historic win after the DC Court stated that the U.S. Securities and Exchange Commission (SEC) cannot deny Grayscale’s conversion of its Bitcoin Trust GBTC to a spot Bitcoin exchange-traded fund (ETF).

Although this is a huge development for the Bitcoin community, the court ruling doesn’t mean that GBTC will automatically convert to a spot Bitcoin ETF. Bloomberg analyst James Seyffart throws some light as to what could be the next SEC actions after the recent development.

The SEC could just proceed with allowing the conversion of the GBTC product to a spot Bitcoin ETF. However, considering the SEC’s past rejections of this investment product, this isn’t going to be a cakewalk.

Now, if they have to stop Grayscale from proceeding with the spot Bitcoin, they have two options:

  1. Seyffart says that the SEC would need to revoke the approval of Bitcoin Futures ETFs. The recent directive from the DC Circuit essentially states that you cannot raise concerns about market manipulation while permitting Bitcoin futures ETFs. However, he believes that the probability of this happening is quite low.
  2. The second option is to reject based on previously unexplored grounds. The Bloomberg analyst suggested that this might be related to Bitcoin custody or settlement, a concern that doesn’t apply to futures ETFs. The SEC has been raising significant concerns regarding custodial arrangements.

The Grayscale victory has provided a major catalyst to the struggling Bitcoin and the broader cryptocurrency market. Hours later, the Bitcoin price surged by 6% and is trading just under the $27,500 level.

Experts View on Grayscale Spot Bitcoin ETF

Some industry experts have chipped in weighing their opinions about Graysclae’s victory. Jake Chervinsky, Chief Policy Officer of the Blockchain Association stated that this victory is certainly a huge embarrassment for the SEC. However, this won’t be all glitter and gold for the SEC as well!

Jake maintains a pessimistic outlook regarding the possibility of Grayscale securing approval for the product from the SEC. He believes the SEC might find another reason to reject the product in the future.

On the other hand, Bitcoin critic Peter Schiff stated that GBTC becoming a spot Bitcoin ETF could be bearish for Bitcoin. “Traders can buy GBTC now and sell or short BTC. Once GBTC becomes an ETF, the discount to NAV goes away. Shareholders could then redeem, forcing GBTC to sell BTC into the market, vastly increasing the tradable supply,” he added. 

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.


Leave a Reply

Your email address will not be published. Required fields are marked *

error: Content is protected !!