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The SEC is in talks with Grayscale to convert GBTC into a spot Bitcoin ETF, a move that could make BTC more accessible to investors.

The SEC is re-evaluating Grayscale’s ETF application following a court ruling in favor of the company, which bodes well for the possible future of a Bitcoin ETF.

The approval of such an ETF, coupled with interest from large players like BlackRock, could bring a flood of investment into BTC, potentially boosting its price.

The U.S. Securities and Exchange Commission (SEC) has begun discussions with Grayscale Investments. They are reportedly discussing whether to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF (Exchange Traded Fund).

Following Grayscale’s recent court victory over the SEC, the move could have a significant impact on the cryptocurrency market. In fact, it could make it easier for everyday investors to participate in Bitcoin.

SEC in talks with Grayscale on Bitcoin ETF

Grayscale has been in ongoing dialogue with the SEC’s Division of Trading and Markets and Division of Corporation Finance after a U.S. federal court ruled that the SEC’s initial rejection of Grayscale’s ETF application was “arbitrary and capricious.” The court’s decision reignited the possibility of a spot Bitcoin ETF. As such, it put Grayscale’s application back under SEC review.

Grayscale Chief Legal Officer Craig Salm stressed the company’s renewed focus on working with trading and market departments. He acknowledged ongoing challenges but expressed optimism. Salm also pointed to the progress made by other financial giants such as BlackRock and Fidelity in the application of Bitcoin ETFs.

“Right now, we’re just focused on constructively re-engaging with the deal and the market…There are still some things that need to be worked out…Overall, it’s been a good engagement, it’s just a matter of when, not if,” Salm said.

The SEC, which has not commented publicly on the new talks, faces heightened expectations and scrutiny.

SEC Chairman Gary Gensler has not recently commented on Grayscale’s application. Nonetheless, he has highlighted the agency’s corporate finance division’s work in tackling evolving technologies and business models. The division will play a central role in evaluating Grayscale’s application.

Gensler said, “I’m not going to prejudge the work of the staff on these multiple ETF applications, but it’s also relevant to these companies. When a company or asset manager seeks to go public, these exchange-traded products need to be registered with the SEC and need to file documents similar to a listing like an IPO.”

Bloomberg ETF analyst James Seyffart and Bloomberg Intelligence senior ETF analyst Eric Balchunas said the approval window for all pending spot Bitcoin ETFs will be open. They said there is a 90% chance that a Bitcoin ETF will be approved by January 10, 2024, even if it is not approved this month.

Seyffart said, “The SEC issued delay orders to BlackRock, Bitwise, VanEck, WisdomTree, Invesco, Fidelity, and Valkyrie simultaneously. This is the first available window since Grayscale’s court victory was confirmed, if the agency wishes to allow all 12 filers to initiate, as we believe it does.”

Meanwhile, JPMorgan noted that the SEC could face lawsuits if it fails to approve the applications. Even some policy experts have criticized the commission for overstepping its authority.

Among the 12 spot Bitcoin ETF applications, there are submissions from major players including ARK 21Shares, BlackRock, Bitwise, VanEck, Wisdomtree, Invesco & Galaxy, Fidelity, Valkyrie, Global X, Hashdex, and Franklin Templeton. BlackRock, in particular, seems to be gaining a lot of interest from investors.

With $8.5 trillion in assets under management, analysts speculate that the approval of the BlackRock Bitcoin ETF could inject $155 billion into Bitcoin, and the massive capital inflow could push the price of Bitcoin to $330,000.

Blockchain analytics firm CryptoQuant reports that “once these ETFs are approved, we expect $155 billion to flow into the Bitcoin market. These firms have a combined assets under management (AUM) of approximately $15.6 trillion, and if they were to put 1% of their AUM into these Bitcoin ETFs, the total dollar volume entering the Bitcoin market would be approximately $155 billion. To put this in context, these amounts represent almost a third of Bitcoin’s current market cap.” #SEC  #GBTC