SEC and Grayscale to Debate on a Bitcoin ETF in Court in March

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The world’s largest dig­i­tal asset man­ag­er – Grayscale – will report­ed­ly present its argu­ments in court regard­ing the poten­tial launch of a Bit­coin ETF in the US on March 7. 

The Unit­ed States Secu­ri­ties and Exchange Com­mis­sion (SEC) will argue against this.

The Lawsuit is Approaching

Grayscale has dis­played its inten­tions to intro­duce an exchange-trad­ed fund (ETF) track­ing the per­for­mance of bit­coin in the Unit­ed States mul­ti­ple times, but to no avail so far. The SEC reject­ed the launch of the prod­uct in June last year and dou­bled down on its deci­sion sev­er­al months later.

Craig Salm – Chief Legal Offi­cer of Grayscale – main­tained in 2021 that the SEC might have a “clear vision” about ETFs, but it should take a “rea­son­able like­li­hood” on the mat­ter. CEO Michael Son­nen­shein went fur­ther, vow­ing to sue the watch­dog for dis­miss­ing the firm’s initiative.

Accord­ing to recent cov­er­age, the Dis­trict of Colum­bia Court of Appeals ordered both sides to meet in court on March 7 to present their point of view. Grayscale pre­vi­ous­ly expect­ed the legal bat­tle to start in Q2, 2023. 

The dig­i­tal asset man­ag­er start­ed pur­su­ing its goal after the SEC approved ProShares’ Bit­coin futures-backed ETF (dubbed BITO) in Octo­ber 2021. 

The numer­ous crash­es in the cryp­tocur­ren­cy indus­try last year have neg­a­tive­ly affect­ed Grayscale. Con­trary to some exchanges which pro­duced proof-of-reserves after the FTX fall­out, it refused to do so, cit­ing secu­ri­ty rea­sons. The com­pa­ny also stat­ed that its cus­to­di­an part­ner – Coin­base – per­forms peri­od­ic on-chain validation:

“Due to secu­ri­ty con­cerns, we do not make such on-chain wal­let infor­ma­tion and con­fir­ma­tion data pub­licly avail­able through a cryp­to­graph­ic Proof-of-Reserve, or oth­er advanced cryp­to­graph­ic account­ing procedure.”

Con­cerns have arisen that Grayscale could face addi­tion­al trou­ble because it is under the umbrel­la of the strug­gling Dig­i­tal Cur­ren­cy Group (DCG). One of its sub­sidiaries – Gen­e­sis – filed for bank­rupt­cy pro­tec­tion already.

More Success in Europe

Unlike its issues with the Amer­i­can reg­u­la­tor, Grayscale intro­duced a cryp­to ETF on the Euro­pean mar­ket last sum­mer. The prod­uct, track­ing the “Bloomberg Grayscale Future of Finance Index,” con­sists of a range of firms part of the sec­tor, includ­ing exchanges, min­ers, bro­kers, asset man­agers, and tech companies.

The list­ing on the Lon­don Stock Exchange, Germany’s Deutsche Börse Xetra, and Italy’s Bor­sa Ital­iana turned the enti­ty into the first Amer­i­can dig­i­tal asset man­ag­er to launch such a fund on the Old Continent. 

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