In a landmark decision, the District of Columbia Court of Appeals gave a nod to the prospects of bitcoin exchange-traded funds (ETFs). On Tuesday, the esteemed court sided with Grayscale, supporting its contention against the Securities and Exchange Commission (SEC). The SEC had earlier declined Grayscale’s proposal to morph its Grayscale Bitcoin Trust into an ETF.
This verdict might usher in a new era for other eminent corporations such as BlackRock and Fidelity, who have shown interest in crafting bitcoin ETFs. The establishment of a spot bitcoin ETF, tradable on conventional stock exchanges, could radically reshape the crypto investment landscape. Interestingly, in this model, the bitcoin remains in a brokerage’s custody. Such an arrangement enables investors to tap into the vast potential of the leading cryptocurrency without the need to own the actual digital coins. This approach has garnered the interest of many in the crypto community who speculate that the approval of a spot bitcoin ETF might expedite the mainstream institutional embrace of cryptocurrencies.
The crypto market’s reaction was overwhelmingly positive. Major cryptocurrencies like bitcoin and ether witnessed a considerable upswing, with Coinbase, a major player listed as the custodian partner in numerous spot bitcoin ETF proposals, soaring over 14% on Tuesday.
Highlighting an inconsistency in the SEC’s decision-making, the court pointed out, “The Commission’s approval for two bitcoin futures ETPs while snubbing Grayscale’s bitcoin ETP proposal lacked a solid justification. Such a regulatory disparity in treating similar products is not justified.”
Grayscale Investments, holding the mantle for the largest crypto fund globally, took the SEC to court in June 2022. The SEC had turned down its application to transform its primary bitcoin fund, prominently recognized by its ticker GBTC, into an ETF. This move to initiate an ETF backed by actual bitcoins rather than bitcoin derivatives was kindled after the SEC greenlit ProShares’ futures-centric bitcoin ETF in October 2021.
The SEC’s denial last summer hinged on Grayscale’s alleged inadequacy in addressing concerns related to potential market manipulation and fortifying investor safeguards.
In response to the court’s verdict, the SEC issued a statement, “We are in the process of thoroughly reviewing the court’s decision to ascertain our subsequent course of action.”
On Grayscale’s end, their spokeswoman labeled the ruling as “a significant leap forward for U.S. investors, the Bitcoin realm, and every advocate pushing for Bitcoin accessibility through the augmented safeguards offered by the ETF framework.”