Last Updated on 3 months by John Piper
Grayscale Investment CEO Michael Sonnenshein commented recently that he doesn’t understand why the United States Securities and Exchange Commission(SEC) won’t ‘protect investors’ with the decision to deny approval of the Grayscale Bitcoin Trust, (GBTC), to be a spot Bitcoin Exchange-Traded Fund (ETF) last.
Sonnenshein, who was interviewed on What Bitcoin Did with Peter McCormack, noted that in June 2013, the SEC rejected approval for Bitcoin ETF. This move “violated” the administrative procedures act, which should eliminate any bias or favoritism by the SEC toward financial firms. Sonnenshein stated that while the rejection GBTC was unacceptable, approaching Bitcoin Futures an electronic funds transfer (EFT) meant that the SEC was acting arbitrarily.
The CEO pointed out that Grayscale took the approval of the Bitcoin ETFs by the SEC as an indication that the regulator was changing its stance on Bitcoin.
He suggested that if the SEC approved GBTC spot Bitcoin ETF, a few billion dollars could instantly return to investors’ pockets, despite SEC warnings about investor protection. Currently, GBTC trades at a discount of its net asset value (NAV). If it were to be converted to an ETF it would “no more” be discounted. GBTC would trade at the NAV and an arbitraged mechanism as part of the trade would eliminate any premium or discount.
Sonnenshein stated that Grayscale is currently suing the SEC. He could make a decision to challenge its rejection of the initial application in September 2023.
Sonnenshein stated that he didn’t get why the SEC would not want to protect investors or return value to them. Grayscale also had a commercial interest in the approval, and he stated that Grayscale would not hide that fact. Grayscale could appeal to the US Supreme Court if the application is denied.
The SEC filed a 73 page brief to the US Court of Appeals in the District of Columbia in December 2022. It explained why Grayscale had rejected its request to convert its $12 million Bitcoin Trust into a spot based Bitcoin ETF. Similar findings were made in other applications to create spot Bitcoin ETFs. The regulator cited concerns that Grayscale’s proposal didn’t adequately protect against manipulation, fraud and scams.
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