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Crypto investment firm Grayscale filed a response to the US Security and Exchange Commission’s (SEC) opposition to converting its Trust (GBTC) into a spot BTC ETF on Jan. 13.
The Bitcoin investment firm wrote that the SEC’s argument that the Chicago Mercantile Exchange (CME) provides adequate protection against fraud and manipulation in the BTC futures market but not the spot market is illogical.
Grayscale's so-called cash market manipulation would have an impact on forward contracts.
According to the firm, any fraud or manipulation in the spot market would affect the price of Bitcoin futures. The gray scale shows the relationship between the two products, adding how one action on one can affect the other.
"Either CME monitoring can detect spot market fraud affecting both forward contracts and spot FTEs, or this monitoring cannot detect spot market fraud for either type of FTE."
SEC has implemented this. “Significant Market Test”
Grayscale’s chief legal officer Craig Salm further pointed out that the SEC arbitrarily applied its “significant market test.” Salm stated that the financial regulator is applying the test loosely for Bitcoin ETFs in the long run. However, the same test is applied "strictly for spot ETF Bitcoin to reach a conclusion focused on results.”
The criterion per se goes beyond the legislative power of the SEC and is arbitrary and without foundation. It's a very imperfect test, essentially rewarding the BTC forward contracts for having been subject to two types of risks, while penalising bitcoin spot to be subject to just one such risk," salm said.
Counsel concluded that the firm's proposal to convert its confidence into a cash ETF meets the requirements of the law. He said the ETF aims at preventing fraud and manipulation while protecting investors and the public interest.
Grayscale is owned by the embattled crypto conglomerate Digital Currency Group (DCG).
Osprey Funds Submits Proposal For GBTC
Meanwhile, Greg King, the CEO of Osprey Fund, has submitted a proposal for GBTC. The president wrote on January. 13 Open letter to DCG CEO Barry Silbert, requesting that his fund be named as a sponsor of the fund in dispute.
King wrote that his fund would reduce gbtc management fees to 0.49% and improve the structure of the fund. The CEO also said his company would immediately pursue a buyback program and register it for the New York Stock Exchange (NYSE).
GBTC’s widening discount had narrowed to 36% as of press time.
