Cryptocurrencies experienced a significant surge in value after a federal appeals court handed a decisive victory to asset management firm Grayscale Investments for launching the inaugural bitcoin exchange-traded fund (ETF) received an emphatic nod from the court, overcoming objections posed by the Securities and Exchange Commission (SEC).
The court’s ruling not only marked a substantial triumph for Grayscale but also signaled a momentous advancement for the entire cryptocurrency industry. This pivotal decision aligns with the industry’s collective endeavor to secure broader mainstream acceptance and engagement with digital assets. The ruling dealt a blow to the SEC, which had been intensifying its regulatory scrutiny over the cryptocurrency sphere.
Following the announcement, the price of bitcoin (BTC-USD) exhibited a remarkable surge, surmounting a 5% increase and propelling beyond the $27,000 threshold. This single-day leap represented the most significant upswing since June. Concomitantly, Coinbase (COIN), the preeminent cryptocurrency exchange in the United States, witnessed an impressive upswing of more than 13%. In parallel, notable bitcoin mining enterprises, Marathon Digital (MARA) and Riot Blockchain (RIOT), soared by 18% and 24%, respectively.
Over the years, asset managers have ardently sought the SEC’s blessing for a spot bitcoin ETF, a financial instrument that could provide investors exposure to the world’s leading cryptocurrency without direct ownership. The SEC, however, had repeatedly turned down various applications, citing concerns about potential susceptibility to market manipulation.
Grayscale’s determined pursuit of this cause led them to take legal action against the SEC in 2022, subsequent to the denial of their bid to convert their Grayscale Bitcoin Trust (GBTC) into a spot bitcoin offering. The firm contended that the SEC had displayed inconsistency, having already sanctioned exchange-traded products that encompass bitcoin futures contracts.
The appeals panel, comprising three judges, sided with Grayscale in their decision, asserting that the firm had substantiated its claims that their product paralleled Bitcoin futures ETFs previously approved by the SEC. In delivering their verdict on Tuesday, the panel concurred that the SEC’s denial of Grayscale’s proposal appeared to be arbitrary and capricious, emphasizing the lack of transparent rationale for differential treatment.
The implications of this court ruling extend beyond Grayscale, potentially opening doors for other asset managers. BlackRock (BLK), the world’s largest asset management company, had earlier submitted a proposal in June for a spot bitcoin exchange-traded fund, with Coinbase slated to serve as the custodian for the associated bitcoin holdings.
Renewed enthusiasm has also surged in other quarters, as institutional players including Invesco and Wisdom Tree Investments resubmitted their spot bitcoin ETF applications this summer.
Tim Bevan, Founder and CEO of UK-based crypto financial services company ETC Group, expressed optimism, proclaiming, “To our mind, there is no doubt now that spot BTC ETFs are coming to the US. The level of pent-up institutional and retail demand in the US is significant.”
In response to the ruling, the SEC communicated its intent to review the court’s decision thoroughly before determining its subsequent actions. A spokesperson from Grayscale remarked that the team, along with their legal advisors, is actively reviewing the court’s opinion and intends to chart their next steps in coordination with the SEC.
Meanwhile, the SEC remains deeply entangled in multiple confrontations with various stakeholders within the cryptocurrency industry. In a series of actions beginning in 2023, the SEC has leveled charges against 17 distinct crypto entities for alleged violations of securities laws. This includes exchanges facilitating digital currency trading and issuers of digital tokens.
At the heart of the SEC’s position is the classification of cryptocurrencies as securities, compelling them to be subject to registration under the agency’s purview. Despite this, the legal terrain is undergoing constant transformation, marked by a diversity of viewpoints. Judge Analisa Torres introduced a facet to this discourse on July 13, asserting that Ripple Labs’ digital token bore the characteristics of a security primarily within the context of sales to institutional investors.
However, Judge Jed Rakoff’s pronouncement on July 31 in an unrelated case introduced a counter-narrative, raising questions about the SEC’s allegations against Terraform Labs, a stablecoin issuer. Amidst these debates, the surge in interest surrounding cryptocurrencies and the bitcoin ETF amplifies the urgency of clarifying regulatory paradigms.
Source: Yahoo finance
