On Monday, the US Securities and Exchange Commission (SEC) declined to challenge a federal appeals court ruling that criticized its refusal of Grayscale Investments' plan to convert its Bitcoin Trust into an exchange traded fund (ETF). This decision could potentially pave the way for more spot bitcoin ETFs, as the SEC's refusal had previously been based on concerns about fraud and market manipulation in unregulated bitcoin exchanges.
Following the court ruling, Grayscale confirmed its readiness for the conversion upon SEC approval. The company's Bitcoin Trust saw a reduction in its discount to net asset value, which is often viewed as a measure of investor expectations. Additionally, the value of Bitcoin increased.
Several other major financial firms, including BlackRock (NYSE:BLK), Fidelity, Ark Invest, WisdomTree, VanEck and Valkyrie, have pending spot bitcoin ETF applications. Many have adjusted their filings to highlight segregated asset holding by custodians. This new language in many applications has led to speculation about active SEC engagement with applicants.
Despite concerns in the US market, spot bitcoin ETFs have been operating smoothly in Europe and similar products are available in Canada. Ark, in its joint filing with 21Shares, highlighted risks such as the perceived use of bitcoin in illicit transactions and significant electricity consumption by digital asset mining operations, potentially inviting government regulations.
In December 2022, GBTC’s discount hit a record 48.9 per cent but narrowed significantly following the court ruling. Bitcoin's value spiked above $28,000 on unfounded rumors of BlackRock's spot bitcoin ETF approval, which were later denied by both BlackRock and the SEC.
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