The regulator has two company applications pending to convert cryptocurrency trusts into exchange-traded funds

Grayscale CEO speaks about productive talks with the SEC regarding the launch of spot crypto ETFs

07.12.2023 - 08:50

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3 min

What’s new? Michael Sonnenshein, the CEO of investment company Grayscale, has praised the interim results of talks with the US Securities and Exchange Commission (SEC) on the topic of launching spot crypto exchange-traded funds (ETFs). The regulator has two applications pending with Grayscale to convert its bitcoin and Ethereum trusts into spot funds. The top executive added that officials are actively engaging with the company, clarifying various nuances of these products. This signals that the commission is keen to make progress on the issue. “We’re feeling optimistic,” Sonnenschein concluded.

Material by The Block

What else is known? Grayscale has been trying to convert the GBTC bitcoin trust into a spot fund since 2021 and sued the SEC last June for rejecting the application. The regulator based the rejection on concerns about market manipulation and a lack of a clear regulatory framework. Currently, only futures-based crypto ETFs are allowed in the US market.

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In August of this year, the court overturned the SEC’s denial and ordered the application to be reconsidered. It pointed to the commission’s inconsistency in emphasizing that already authorized futures ETFs carry the same risks as spot ETFs. JPMorgan noted that such language would force the SEC to approve spot products: otherwise, it would have to revoke authorization for futures funds, which would have serious political and legal consequences.

Congressmen have also called for spot crypto ETFs to be allowed into the market as a matter of urgency, but the regulator said in September that it was only studying the Grayscale court ruling for now. Kevin O’Leary, chairman of O’Shares ETFs, believes the SEC will not approve such products under the current leadership.

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As for the Grayscale Ethereum Trust (ETHE), its managers voluntarily began filing reports with the SEC in October 2020, and three years later a request to convert the exchange-traded product was filed. That said, in early December, officials pushed back the deadline for the application to January 25, 2024.

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