Tuesday, May 28

Grayscale Secures Court Victory in Battle with US SEC Over Bitcoin ETF

In a significant development, a federal appeals court has solidified Grayscale Investments’ position in its quest to establish an exchange-traded fund (ETF) based on Bitcoin, despite the objections of the US Securities and Exchange Commission (SEC).

This decision effectively sends the matter back to the SEC, reaffirming the court’s previous ruling from August. In that ruling, the SEC’s rejection of Grayscale’s proposal to convert its trust into an ETF was overturned, with Judge Neomi Rao describing the SEC’s decision as “arbitrary and capricious.” The regulator failed to provide a satisfactory explanation for why it had approved similar products. The SEC’s main argument against a Bitcoin-based ETF was the perceived lack of sufficient oversight to detect potential fraud.

Grayscale’s spokesperson, Jennifer Rosenthal, expressed eagerness to cooperate with the SEC in converting GBTC into an ETF. She stated, “GBTC is operationally ready, and we intend to move as expeditiously as possible on behalf of our investors.”

The potential approval of Bitcoin ETFs is viewed as a pivotal moment by proponents of digital assets. Broader accessibility is expected to drive mainstream acceptance of what was once considered a lightly regulated speculative niche. Recent industry scandals and bankruptcies, like the collapse of the FTX exchange, have contributed to a decline in the estimated value of the crypto sector, which has fallen by more than half since late 2021 to approximately $1 trillion, with Bitcoin representing about half of that total.

In light of this court mandate, Bitcoin surged above $31,000 on Monday, reaching a level not seen since July. This development is seen as a step forward in clearing the path for a Bitcoin ETF.

The entire cryptocurrency market is closely monitoring the efforts of asset managers seeking approval for ETFs. Just last week, Bitcoin experienced a brief 10% surge, marking its highest price since August, following an erroneous report suggesting that BlackRock had received SEC approval for its long-anticipated Bitcoin ETF. The excitement subsided when the world’s largest asset manager clarified that its application was still under review. BlackRock is one of approximately a dozen firms vying to offer similar products.

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