SEC svarade på en stämningsansökan från Grayscale Investments

Recently, Grayscale Investments filed a lawsuit against the US Securities and Exchange Commission (SEC), according to which they had to answer why the conversion of the Grayscale Bitcoin Investment Trust into a bitcoin ETF was rejected.

The regulator gave an answer in court and called such a decision quite reasonable and understandable. In their statement, they began by saying that the commission had previously approved ETFs based on CME's futures contracts. These exchange-traded funds have also been registered with the Commodity Futures Trading Commission:

Previously, the Commission approved ETFs that are based on CME futures contracts registered with the CFTC; thus, the underlying assets of these funds are subject to strict supervision.

They explain the refusal to convert a bitcoin trust into an ETF by the fact that cryptocurrencies do not have proper regulation and the flagship cryptocurrency spot market is the complete opposite of what the SEC approves:

The spot bitcoin market, by contrast, is fragmented and unregulated. The Applicant has not presented a strong case for the thesis that the CME's oversight of futures trading would be sufficient to detect and deter fraud and manipulation in the spot market.

The US Securities and Exchange Commission (SEC) concluded their arguments with the conclusion that their action is quite logical, since cryptocurrency markets are not subject to regulation and differ from futures funds traded on the exchange.

The application for the conversion of Grayscale Bitcoin Investment Trust into ETF took place in October last year. This came at the same time as the first U.S. approval of an exchange-traded fund that used a Bitcoin futures settlement base. The US Securities and Exchange Commission (SEC) had nothing against the release of the Bitcoin Strategy ETF on the stock market.

After that, the SEC rejected the application of Grayscale Investments, calling their product inappropriate for the "prevention of fraudulent and manipulative actions." They also said that by such actions they want to protect investors and the public interest.

In June 2022, Grayscale Investments filed a lawsuit against the regulator, calling their actions illogical, wayward and willful, despite the fact that the SEC, it would seem, had already explained their act.

Since 2021, Grayscale Bitcoin Investment Trust investment units have been declining in value. In December 2022, the size of the "discount" of the shares was 48%, and the situation with the SEC and their response in court makes the situation even worse.

Also, don't forget that the Grayscale Bitcoin Investment Trust is a subsidiary of the Digital Currency Group, which is currently in deep financial trouble due to the collapse of FTX.

Such a connection obviously indicates the possible further liquidation of Grayscale Investments and their bitcoin direction. Analysts from Bernstein came to the same conclusion.