• Grayscale recently filed a lawsuit against the Securities and Exchange Commission challenging the agency’s decision to reject the conversion of its Grayscale Bitcoin Trust into an exchange-traded fund.
• The District of Columbia Court of Appeals has set a date to hear oral arguments in the case in March.
• After a difficult 2022 marked by difficult macroeconomic circumstances, investors are now staying away from the crypto market.
The crypto industry has experienced a tumultuous period in recent years, with the events of the past year having a particularly significant effect on the sector. In June 2022, Grayscale, a digital asset manager, filed a lawsuit against the Securities and Exchange Commission (SEC) after the regulator denied its request to convert its Bitcoin Trust, commonly known by its ticker GBTC, into an exchange-traded fund (ETF). Grayscale’s decision to pursue the ETF, which would be backed by actual bitcoins instead of bitcoin derivatives, followed the SEC’s approval of ProShares’ futures-based bitcoin ETF in October 2021.
Despite the SEC’s delay in making a decision, the regulator ultimately denied Grayscale’s application last summer citing the company’s reluctance to respond to inquiries regarding worries about market manipulation and investor safeguards. Grayscale has since sought to challenge the SEC’s decision, and the District of Columbia Court of Appeals has now set a date to hear oral arguments in the case. Both parties will present their arguments on March 7 at 9:30 a.m. ET.
The turbulent conditions in the crypto market have only been compounded by the events of the past year. In addition to the SEC’s denial of the Grayscale ETF, the industry has faced its worst challenges in 2022 with the collapse of Terra, the bankruptcy of Three Arrows Capital, the demise of Celsius, the fall of Voyager, and the fall of FTX. This difficult macroeconomic environment has led to many investors staying away from the crypto market, with Grayscale’s sister company, the crypto lender Genesis, filing for bankruptcy last week.
Despite the challenging circumstances, Grayscale is determined to pursue its case against the SEC. The company’s legal team is confident that the court will recognize the merits of its arguments, and that its Bitcoin Trust ETF will be approved by the regulator. If the court rules in Grayscale’s favor, it could pave the way for the approval of other crypto ETFs, which would likely bring a new wave of investment into the industry.