Grayscale ETF Moves Closer To Reality After Legal Victory

Key Points:

• A US court overturns the SEC’s decision, paving the way for wider cryptocurrency investment.
• The ruling drives Bitcoin’s surge, propelling Grayscale’s Bitcoin Trust by over 20%.
• Grayscale’s ETF move could unlock billions for investors.

According to Bloomberg, Grayscale has taken a significant stride towards launching a Bitcoin exchange-traded fund (ETF) in the US, a development that could mark a pivotal moment in the cryptocurrency sector’s bid to attract mainstream investor funds.

The prolonged battle between Grayscale and the SEC culminated in the three-judge panel overturning the SEC’s ETF halt decision. Judge Neomi Rao emphasized the inconsistency in the treatment of similar products.

This legal victory is a significant win for the crypto industry. Following the US appeals court’s favorable ruling for Grayscale Investments in its ongoing dispute with the SEC over converting its Grayscale Bitcoin Trust into a spot ETF, the price of Bitcoin surged. The GBTC saw a remarkable surge of over 24%.

While the SEC, which is currently reviewing the decision, retains the option to challenge it, this ruling could have far-reaching implications. Grayscale has asserted that transitioning to an ETF structure could unlock around $5.7 billion from the existing $16.2 billion trust.

This move would simplify the creation and redemption of shares. The broader crypto community views the launch of a cryptocurrency-based ETF, rather than one based on futures, as a significant milestone.

Last year, the SEC rejected Grayscale’s ETF conversion proposal, citing concerns about oversight to detect fraudulent activities. It responded with a lawsuit to reverse the decision, alleging discrimination against its product in contrast to similar Bitcoin futures ETFs that were approved.

ETF analyst James Seyffart clarified that while this ruling does not automatically convert GBTC into an ETF, it brings the process closer. The SEC has up to 45 or 60 days to issue another order. Appeals-wise, the SEC has a 45-day window to apply for an en banc hearing.

The court’s opinion acknowledged the company’s evidence of product similarity to SEC-approved Bitcoin futures ETFs. The alignment of underlying assets and identical surveillance agreements with the Chicago Mercantile Exchange supported Grayscale’s case.

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