Gary Gensler, the Chair of the Securities and Exchange Commission (SEC), informed legislators that he is presently examining a judicial verdict that favored Grayscale Investments (GBTC), a digital currency asset manager, in their recent pursuit of a spot bitcoin exchange-traded fund (ETF).
During a Senate Banking Committee hearing on Tuesday, Senator Bill Hagerty, a Republican from Tennessee, probed Gensler about what the SEC requires to greenlight a spot bitcoin ETF application.
What further details do you need from issuers concerning the market and its infrastructure to facilitate this process? the legislator asked.
Gensler’s response was that his agency is currently assessing the Grayscale decision, as well as various filings related to bitcoin exchange-traded products.
This conversation comes amid a broader context of concerns about the SEC’s approach to the cryptocurrency industry. On September 10, Senator Bill Hagerty said in an interview with Fox Business that “[t]he SEC is essentially executing Operation Choke Point 2.0. This time, the targeted industry is the cryptocurrency industry, & it’s creating tremendous uncertainty.”
The SEC is essentially executing Operation Choke Point 2.0. This time, the targeted industry is the cryptocurrency industry, & it’s creating tremendous uncertainty. pic.twitter.com/Bu3gqlvx3t
— Senator Bill Hagerty (@SenatorHagerty) September 10, 2023
This statement refers to alleged government efforts to discourage banks from working with crypto firms, which some have termed ‘Operation Choke Point 2.0.’
This issue has garnered significant attention, with concerns being raised about the impact on companies in the crypto space and the potential for political pressure influencing banking decisions. The situation remains fluid, with the SEC’s actions and policies towards the crypto industry being closely watched by stakeholders.
An impactful decision
On August 29, a trio of judges from the U.S. Court of Appeals for the D.C. Circuit delivered a verdict directing the Securities and Exchange Commission to reconsider Grayscale’s application for a spot bitcoin ETF.
This came about after Grayscale took legal action against the SEC when it rejected their proposal to transform their primary GBTC fund into a spot bitcoin ETF. The court specifically pointed out the SEC’s inconsistent approval process between spot bitcoin ETFs and similar funds based on futures contracts, which have been given the green light by the regulator.
This development has occurred in parallel with several companies, including financial giants BlackRock and Fidelity, filing applications for their own spot bitcoin ETFs.
Some industry observers believe that the court’s ruling in favor of Grayscale may influence the SEC to approve these new applications.
Last week, Grayscale wrote a letter to the SEC, expressing their desire to meet with the agency and urging them to approve their spot bitcoin ETF. The purpose of this letter was to initiate a constructive dialogue in the hopes of gaining approval for their proposed ETF.
“After the Commission has had the opportunity to fully analyze the court’s opinion in light of the record, including the reasons for rejection set forth in the vacated order as well as the evidence and arguments put forward by Grayscale, NYSE Arca and public commenters, we believe the Commission should concludethat there are no grounds for treating the Trust differently from ETPs that invest in bitcoin futures contracts traded on the Chicago Mercantile Exchange (“CME”) whose Rule 19b-4 filings the Commission has previously approved, and therefore move expeditiously to approve the Trust’s Rule 19b-4 filing as well,” lawyers for Grayscale said in the letter.
The SEC still has the opportunity to ask for an “en banc hearing.” This is a type of legal proceeding where all three judges would revisit the case, essentially providing another chance at hearing the arguments and making a decision.
If 45 days pass without such a request, the court will finalize its mandate, outlining the next steps in the case. Additionally, the SEC also has the option to challenge the D.C. Circuit’s ruling by taking the matter to the Supreme Court.
Reference: theblock
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