The US Securities and Exchange Commission (SEC) “references” whether exchange-traded funds (ETFs) directly linked to Bitcoin price could be a means of fraud, raising concerns about the proposal by one of the largest trusts, the BTC holds.

The governing body has issued a notification on Friday invited the public to submit written comments on Grayscale Investments LLC’s application to convert the Grayscale Bitcoin Trust (GBTC) into a spot price-pegged Bitcoin ETF. Previously, the SEC also took a similar step in relation to Bitwise’s proposal to launch a Bitcoin ETF.

The announcement asked for feedback on whether the proposed ETFs are vulnerable to manipulation and fraud, and whether Bitcoin itself can be held to the same standards.

The SEC has denied six similar filings by VanEck, WisdomTree and SkyBridge Capital since November.

Grayscale’s $27 billion fund has been a key channel for financial institutions’ exposure to crypto since its inception in 2013, which is why the fund has historically traded at higher levels. However, GBTC is now trading at a discount to spot prices following Bitcoin’s rally and the launch of BTC futures-backed ETFs on Wall Street.

Source: Bloomberg

Demand for spot bitcoin ETFs could be sustained in the short-term. Trading volume between crypto ETFs remained stable in January, with a relatively small drop in flows.

The gap between Bitcoin and GBTC prices will disappear if the SEC gives the green light to Grayscale’s ETF proposal on July 6, but it’s likely to be rejected.