A federal appeals court in D.C. ruled that the SEC must reconsider rejecting Grayscale's bid to turn its Bitcoin Trust into an ETF. This victory may lead to a spot Bitcoin ETF in the U.S. sooner than expected, paving the way for easier access to bitcoin investing. The court emphasized the need for proper explanation from the SEC and mentioned similarities between Grayscale's proposal and approved bitcoin futures products. “Grayscale has demonstrated its proposed bitcoin ETF is materially similar, across relevant regulatory factors, to the approved bitcoin futures ETFs," the ruling said. "First, the underlying assets – bitcoin and bitcoin futures – are closely correlated. And second, the surveillance sharing agreements with the CME are identical and should have the same likelihood of detecting fraudulent or manipulative conduct in the market for bitcoin and bitcoin futures Grayscale's ETF application immediately, it prompts the SEC to review it again. The court called the denial of the spot ETF proposal "arbitrary and capricious" because the SEC failed to explain the different treatment of similar products.
We greatly welcome this news, as increased regulatory clarity around digital assets in the world’s biggest market, could pave the way for long-term, sustainable growth of the space. As investor interest increases in bitcoin and other cryptocurrencies, it has become increasingly important for a sound regulatory framework to emerge in this sector, in order for it to mature and flourish. It is our hope that this development leads to investors having a safer and more efficient way to invest in bitcoin.
A 2021 study by the Bank of Canada, stated that 60% of Canadian Bitcoin owners cited investment as the most common reason for owning Bitcoin. The same study stated that 19% of people that did not own bitcoin cited “lack of trust-related reasons”. If this study is a true reflection of investor sentiment, we can assume that as investing in bitcoin becomes more integrated into the legacy financial system, there will be increased interest in it as a vehicle for wealth-building.
As the providers of the longest-running spot bitcoin ETF in the world, we are very much behind these recent developments, and applaud them. Launched on February 17th, 2021, the Purpose Bitcoin ETF (“BTCC”) has over $800 million in assets under management which provides investors with deep liquidity and tight spreads, making it one of the most efficient ways to invest in bitcoin. The success of this fund, we believe, is a testament to the desire of investors to invest in cryptocurrencies through traditional means.
Historically, the most common way to get exposure to bitcoin has been through crypto exchanges. However, as the last two years has shown, this can be unnecessarily risky, with investors losing hundreds of millions of dollars through the collapses of FTX, Celsius, and BlockFi. On top of this, this method can have a higher barrier to entry for the average investor, as they need to take on a degree of responsibility over their assets (storing crypto in offline cold wallets for example) that is not present with the purchasing of stocks and ETFs.
So, if you want to invest in bitcoin, we can’t overstate the importance of safe accessibility. With spot bitcoin ETFs, you can be comfortable that they offer the highest level of security with institutional custodians. Further, individual crypto marketplaces have been known to have pricing issues relative to other marketplaces. By using a proprietary index methodology, you are insulated from pricing anomalies that have been documented at crypto exchange marketplaces.
—Gorast Tasevski, Product Analyst
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