Grayscale CEO: SEC on the Verge of Violating APA Requirement After Failing to Approve Spot BTC ETF

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Speaking to CNBC last week, the CEO of Grayscale Investments, Michael Sonnenshein, has asserted that the US Securities and Exchange Commission (SEC) risks violating the Administrative Procedure Act (APA) if it continues to renege on approving a spot Bitcoin exchange-traded fund (ETF).

Over the last year, the regulatory watchdog has approved two futures-tied BTC ETFs. This trend has sparked some optimism in the cryptocurrency industry that the Commission is getting closer to approving a spot Bitcoin ETF. However, this expectation continues to elude the industry as the SEC remains unwilling to green-light a spot BTC ETF.

Sonnenshein explained:

“From the SEC standpoint, there were several protections that 40 Act products have that 33 [Securities Act of 1933] products don’t have, but never ever did those protections address the SEC’s concern over the underlying Bitcoin market and the potential for fraud or manipulation.”

The Grayscale CEO added: “So the fact that they’ve now evolved their thinking and approved a 33 Act product with Teucrium really invalidates that argument and talks to the linkage between the bitcoin futures and the underlying bitcoin spot markets that give the futures contracts their value.”

Sonnenshein argued:

“If the SEC can’t look at two like issues, the futures ETF and the spot ETF, through the same lens, then it is, in fact, potentially grounds for an Administrative Procedure Act violation.”

The Administrative Procedure Act essentially dictates the procedure with which federal agencies establish and implement regulations.

Grayscale filed an application with the regulatory body in October last year, where it applied to convert its flagship Bitcoin Trust (GBTC) to a Bitcoin ETF. Grayscale plans to list GBTC on the New York Stock Exchange (NYSE) if the product scales SEC approval.

Grayscale to Sue SEC if GBTC Conversion Application Fails

The digital assets management firm has set July as its deadline to hear back from the SEC on the approval of the product. That said, Sonnenshein has asserted that the company could drag the Commission to court if it failed to approve its request for its ETF conversion.