America’s Largest Cryptocurrency Exchange, Coinbaseputs all its weight behind Grayscale, the largest Bitcoin funds—in its legal battle with the Securities and Exchange Commission (SEC).
Grayscale is to chase the federal regulator for its refusal to approve the company’s application, or any other, for a Bitcoin ETFs. The fund says the SEC “fails to apply consistent treatment to similar investment vehicles”, as evidenced by the Commission’s willingness to approve several Bitcoin Futures ETFbut refused to allow cash market ETFs to go ahead.
Coinbase amici curiae Shortfiled with the United States Court of Appeals for the District of Columbia on Tuesday, made the same argument.
“Both on the spot and to come [exchange-traded products], whether tied to Bitcoin or other commodities like gold, platinum or palladium, create the same investment exposure for investors,” the exchange argued. “Both products are designed to track the price of the underlying commodity, Bitcoin.”
An ETF is an investment vehicle that allows buyers to gain exposure to an asset without the need to purchase and hold the underlying asset itself. A Bitcoin ETF, for example, would allow investors to indirectly invest in Bitcoin without buying the cryptocurrency through an exchange and storing it in a digital space. wallet.
Futures and spot ETFs essentially achieve the same goal, but through different means. Whereas a futures ETF tracks the price of derivative contracts – which themselves allow traders to bet on the future price of Bitcoin – a spot market ETF would back its stock directly with Bitcoin.
The futures market is also regulated by the CFTC. SEC Chairman Gary Gensler has in the past hinted that he thinks this could make these markets safer for ordinary investors. The Bitcoin spot market, the buying and selling of physical BTC, is unregulated.
In its brief, however, Coinbase claimed that preventing Bitcoin spot ETFs from reaching the market “unjustifiably limits investor choice,” and further argued that the SEC is “engaging in an arbitrary practice. capriciousness of picking winners and losers among investment products”.
Several crypto-focused nonprofits were also represented as amici curiae in the brief, including the Blockchain Association, Chamber of Digital Commerce, Chamber of Progress and Coin Center.
After turning down several Bitcoin spot ETF proposals from different partsthe SEC’s reasoning remains the same: ETF providers must enter into a “monitoring sharing agreement” with a “significantly sized regulated market” related to the underlying bitcoin being monitored, as a measure against possible market manipulation.
Before being rejected in June, Grayscale’s request argued that it could use the CME Bitcoin futures market as a source of market manipulation data. However, the commission claimed that this market, although regulated, was not sufficiently linked to the “Bitcoin spot”.
Several other countries have already approved Bitcoin spot ETF products, including Canada, Australia, Germany, and Brazil. According to Coinbase, the SEC’s refusal to do the same drives U.S. investors to these markets and other trading venues that fall outside of the Commission’s jurisdiction.
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