Grayscale CEO: The Bitcoin Trust could return billions of dollars

bitcoin fall

Grayscale Investment CEO Michael Sonnenshein recently commented that he does not understand why the United States Securities and Exchange Commission (SEC) won’t ‘protect’ investors with the decision to deny approval for the Grayscale Bitcoin Trust (GBTC) to be a spot Bitcoin exchange-traded fund (ETF) last year.

In an interview on What Bitcoin Did with podcast host and Bitcoin bull Peter McCormack, Sonnenshein noted that the SEC denied approval for the Bitcoin ETF in June last year, stating that the move “violated the administrative procedures act”, an act which should eradicate any bias or “favouritism” by the SEC towards financial firms. Sonnenshein continued to say that the rejection GBTC but approaching Bitcoin Futures an EFT, that the SEC was acting “arbitrarily”.

The CEO noted that when the SEC first approved the Bitcoin ETFs, Grayscale took it as a signal that the regulator’s stance on Bitcoin was changing.

He also suggested that if the SEC were to approve GBTC as a spot Bitcoin ETF, a couple of billion dollars could immediately return to investors’ pockets, despite the SEC’s warnings about investor protection. Currently, GBTC trades at a discount to its net asset value (NAV), and if it converted to an ETF, it would “no longer” be discounted. GBTC would trade at its NAV, and an arbitraged mechanism would become a systematic operation as part of the trade, eliminating any premium or discount.

As a result, Sonnenshein commented that Grayscale is in the process of suing the SEC and could have a decision to challenge the SEC’s rejection of its initial application as early as September 2023.

Sonnenshein added that he couldn’t understand why the SEC wouldn’t want to protect investors and return value to them. He also acknowledged that Grayscale had a commercial interest in this approval and stated that Grayscale would not shy away from that fact. If the application is rejected, Grayscale may decide to take the decision and appeal to the US Supreme Court.

In December 2022, the SEC filed a 73-page brief with the US Court of Appeals for the District of Columbia, highlighting why it had denied Grayscale’s request to convert its $12 billion Bitcoin Trust into a spot-based Bitcoin ETF. The regulator made similar findings in previous applications to create spot-based Bitcoin ETFs, citing concerns that Grayscale’s proposal did not adequately protect against manipulation, fraud, and scams.

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