The US Securities and Exchange Commission (SEC) has once again thrown hold water on Grayscale Investments’ plants to convert its US$11bn Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF).
It has been Grayscale’s long-running ambition to convert its trust, which is the largest of its kind, into a spot ETF, but the SEC under chair Gary Gensler has shown little interest in approving the transition.
Gensler is widely considered a crypto permabear, and in June 2022, nixed Grayscale’s plans on grounds of protecting “investors and the public interest since the proposal failed to demonstrate how it is “designed to prevent fraudulent and manipulative acts and practices.”
Grayscale’s chief executive proceeded to launch a legal challenge to the SEC’s decision but the SEC has now sought to crush the appeal via a December 9 filing in the US Court of Appeals, reports Cointelegraph.
Grayscale is aggravated by the SEC’s consistent refusal of bitcoin spot ETFs, pointing to the regulatory body’s more liberal approach to bitcoin futures contracts.
But there are higher stakes at play for Grayscale: Shares in its flagship GBTC fund are now running a near 50% discount to its bitcoin assets under management, as the trust battles with depressed investor sentiment amid a bruising bear market.
Earlier this month, it was reported that Fir Tree Capital Management was suing Grayscale for “shareholder-unfriendly actions” that have caused significant losses for the trust’s 850,000 investors.
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“In 2013, we launched Grayscale Bitcoin Trust (GBTC) to provide investors with access to bitcoin, and always with the intention of converting it to an ETF when permitted by US regulators,” a Grayscale spokesperson recently told Bloomberg.
“We remain 100% committed to converting GBTC to an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders,” added the spokesperson.
Yet there could be a beacon of hope on the horizon for Grayscale: VanEck’s head of digital assets research Matthew Sigel predicts that Gensler will step down from the SEC in 2023 following scrutiny over his apparent failure to protect US citizens from the FTX collapse.