Bitcoin’s phenomenal rise to $31K is matched by a landmark court decision formalizing Grayscale’s victory over the SEC, solidifying the legitimacy of digital currencies in the eyes of regulators and paving the way for mainstream adoption.
The DC Circuit Court of Appeals has finalized Grayscale Investments’ court victory over the US Securities and Exchange Commission (SEC), placing the responsibility back on the regulator. In August, a three-judge panel unanimously ruled that the SEC’s rejection of Grayscale’s proposal to convert its bitcoin trust (GBTC) to an ETF was “arbitrary and capricious.” The court’s final mandate, filed on Monday, affirms its decision and comes after the SEC’s window to appeal the ruling expired. Grayscale is now looking forward to working with the SEC to convert GBTC to an ETF. While the court’s ruling does not provide clarity on the next steps, industry experts believe it could pave the way for the approval of a spot bitcoin ETF. Bitcoin’s price has also seen a boost, surpassing $31,000, partly due to the change in sentiment surrounding a potential ETF approval. However, the SEC still has the option to deny GBTC’s conversion on different grounds, and it could potentially ask the US Supreme Court to review the Court of Appeals ruling. Grayscale filed to register shares of GBTC under the Securities Act of 1933, marking another milestone in the process of converting the trust into an ETF. The SEC has declined to comment on the issue, and SEC Commissioner Hester Peirce has expressed her belief that the regulator should have approved a spot bitcoin ETF years ago. The court ruling criticized the SEC for its inconsistent treatment of similar products and its failure to explain the financial and mathematical relationship between the spot and futures markets. While the SEC allowed bitcoin futures ETFs to trade in October 2021, the approval of spot bitcoin ETFs is still pending. The SEC is set to decide on a spot bitcoin ETF proposed by Ark Invest and 21Shares on January 10, and it may also rule on other similar products by BlackRock, Fidelity, and others at that time. Industry watchers anticipate that the SEC will grant approval for spot bitcoin applications, possibly as early as the end of this year or in early- to mid-2024.