Grayscale's Bitcoin ETF Ruling Shifts Sands Of Crypto Regulation: 3 Analysts Weigh In

The U.S. could soon have its first Bitcoin BTC/USD spot exchange-traded fund (ETF).

The news is bound to be a major topic of discussion at Benzinga’s Future of Digital Assets event in New York City on Nov. 14, 2023. In addition to staying up-to-date on trends like artificial intelligence (AI), regulations, and institutional adoption in the crypto space, Benzinga has been following Securities and Exchange Commission (SEC) actions like this one.

What Happened: A federal court order directed the SEC to reconsider its rejection of Grayscale Investments’ application.

Grayscale, the entity behind the crypto fund, first attempted to transform its GBTC closed-end fund into an ETF in October 2021.

Originally, the SEC declined Grayscale’s application due to unresolved questions about market manipulation among other concerns, which saw Grayscale immediately file an appeal.

In its ruling, the court said that the SEC failed to provide sufficient reasoning for approving two Bitcoin futures ETPs while denying Grayscale’s Bitcoin spot ETF. The judgment comes amid a flurry of applications from major financial institutions like BlackRock Inc BLK, Fidelity, and WisdomTree Inc WT, who are all seeking to launch their own spot Bitcoin ETFs.

The court order does not guarantee SEC approval, but mandates a review of Grayscale’s application.

Photo via Shutterstock.

What Analysts Think About The Bitcoin ETF

Canaccord Genuity: Joseph Vafi sees the ruling as another victory for the crypto industry. Vafi said that the decision underscores the flaws in the SEC’s “regulation by enforcement” strategy. The ruling comes after Ripple’s own victory against the SEC in July. Canaccord also noted pending federal bills with bipartisan support that could force the SEC to change its regulatory approach.

Oppenheimer: Owen Lau warned that this doesn’t necessarily open the floodgates for immediate spot Bitcoin ETF approvals. The analyst said that the SEC could still reject Grayscale’s application again, but also noted that the court ruling lays a stronger foundation for future approvals.

Bernstein: Gautam Chhugani said Grayscale’s court victory is a landmark win for the crypto industry but underscored that the product isn’t an ETF yet. The ruling, however, does provide Grayscale a fair chance for its application to be reviewed alongside other applicants. The analyst noted the upside volatility in Bitcoin and crypto stocks following the news, indicating market optimism despite regulatory uncertainties.

Read also: Grayscale Ruling: SEC Slammed By Industry Leaders For Ineffective Crypto Regulation

The Grayscale ruling is another example of the crypto industry’s complex relationship with regulatory bodies. While not a guarantee for future spot Bitcoin ETF approvals, it does tilt the scale in favor of more permissive financial innovation.

Watch Ark Invest’s Cathie Wood correctly predict the overturning of the SEC’s Bitcoin ETF decision in an exclusive interview with Benzinga CEO Jason Raznick:

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