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Will Grayscale’s GBTC Become the First Spot Bitcoin ETF in the U.S.?

Grayscale Investments, the largest digital asset manager, has met with the U.S. Securities and Exchange Commission (SEC) to discuss its plan to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF).


The memo, dated Nov. 20, 2023, reveals that Grayscale has been in contact with both the SEC’s Division of Trading and Markets and the Division of Corporation Finance, following a court ruling that the agency has to re-review the firm’s bid for a spot bitcoin ETF.

The ruling, issued by the U.S. Court of Appeals for the D.C. Circuit in August, found that the SEC had no valid reason to reject Grayscale’s application for a spot bitcoin ETF while approving similar funds based on bitcoin futures contracts. The court ordered the SEC to reconsider Grayscale’s proposal in light of the potential fraud and manipulation risks in the bitcoin spot market.

Grayscale submitted a fresh filing for the conversion of GBTC into a spot bitcoin ETF a few weeks ago, ahead of the court’s release of a formal mandate to enforce the August ruling. GBTC is the largest bitcoin fund in the world, with over $40 billion in assets under management.

The SEC has not yet made a decision on Grayscale’s application or any of the other spot bitcoin ETF proposals that are pending before the agency. SEC Chair Gary Gensler has said that the agency is still reviewing the court’s decision and that the approval process is a “time tested” one that involves feedback from the staff.

Grayscale’s plan to convert GBTC into a spot bitcoin ETF has been eagerly awaited by the crypto industry, as it could potentially boost the liquidity and efficiency of the bitcoin market, as well as lower the fees and premiums associated with GBTC. A spot bitcoin ETF would also allow investors to directly access the underlying asset, rather than a synthetic exposure through futures contracts.

If Grayscale’s plan is approved, it could pave the way for other spot bitcoin ETFs to launch in the U.S., such as those proposed by Fidelity, BlackRock, and ARK Invest. However, the SEC’s stance on spot bitcoin ETFs remains uncertain, as the regulator has expressed concerns about the lack of oversight and transparency in the bitcoin spot market.