The Securities and Exchange Commission of the United States is seeking public input on whether exchange-traded funds linked directly to the price of Bitcoin could be used to commit fraud, citing concerns about a submission from one of the largest trusts holding the token.
On Friday, the regulator issued a notice inviting the public to submit written comments on Grayscale Investments LLC’s application to convert its Grayscale Bitcoin Trust (ticker GBTC) into an ETF linked to Bitcoin’s spot price. The SEC had done the same thing a few days earlier in a notice regarding another application to launch a Bitcoin ETF, this time by Bitwise.
The notice sought feedback on whether the proposed ETFs were vulnerable to manipulation and fraud, as well as whether Bitcoin itself could be held to the same standard. Since November, the SEC has denied six similar applications, including those from VanEck, WisdomTree, and SkyBridge Capital.
Since its inception in 2013, Grayscale’s $27 billion fund has been a key way for financial institutions to gain exposure to cryptocurrency, which is why it has historically traded at a premium to Bitcoin’s actual price. However, following the rise in crypto prices and the launch of ETFs backed by crypto derivatives on Wall Street, GBTC now trades at a discount.
Despite recent price volatility, Various sources reported that demand for an ETF linked to Bitcoin’s spot price may be sustained in the near term. According to BI’s Rebecca Sin and James Seyffart, trading volume among crypto ETFs remained stable in January, with only minor flow declines.
“GBTC’s discount has weighed on shareholders for months, but it provides Bitcoin exposure at below-market prices,” they wrote earlier. The gap would close if the SEC approved Grayscale’s ETF application on July 6, but analysts predict a denial.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.