Grayscale CEO calls SEC ‘short-sighted’ after regulator’s comments

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The CEO of the investment firm that manages the world’s largest bitcoin fund has spoken out on comments from Securities and Exchange Commission Chairman Gary Gensler on the likely approval path for America’s first bitcoin ETF.

Michael Sonnenshein, CEO of Grayscale Investments, warned on Tuesday that the SEC would be wrong if it granted approval to an ETF based on Bitcoin futures before one linked to the cryptocurrency itself. His company has sought to convert the massive Grayscale Bitcoin Trust, which owns bitcoin rather than contracts tied to its future price, into an ETF.

“It would be shortsighted for the SEC to allow a futures product to market before a spot product,” Sonnenshein told CNBC’s “Squawk Box” on Tuesday. “They should really allow both products on the market at the same time and let investors choose whatever route they want.”

Last month Gensler signaled a preference for reviewing applications from investment firms seeking to launch ETFs linked to bitcoin futures that trade on the Chicago Mercantile Exchange. This is an alarming development for Grayscale, which has been looking to convert its bitcoin trust into an ETF since 2016. The approval of the first bitcoin ETF in the United States is seen as a crypto step because it would help the adoption of the emerging asset class.

During the “Squawk Box” discussion and in a follow-up telephone interview, Sonnenshein warned of the potential drawbacks of the SEC’s position. An ETF based on futures contracts would cost investors more because of the costs involved in renewing futures contracts when they expire, Sonnenshein said.

Additionally, investors who want an investment fund that more closely tracks the price of bitcoin can look to a futures ETF, which could divert capital away from flagship Grayscale, he said. This is one of the main reasons why Grayscale wants to convert its fund, known by its ticker GBTC, to an ETF. As currently constructed, the fund can trade at a discount or premium over bitcoin itself.

“If a futures ETF enters the market without GBTC being able to convert to an ETF, it could harm investors who currently hold tens of billions of dollars in GBTC, as well as investors exposed to GBTC in mutual funds, retirement accounts and other places, ”Sonnenshein said in a telephone interview.

Overall, he viewed the SEC’s stance as bullish for bitcoin, as if regulators are comfortable with cryptocurrency-related derivatives, it suggests they are comfortable with the class. underlying asset.

Grayscale’s bitcoin trust has $ 32.4 billion in assets under management and owns more than 3% of the available supply of bitcoin, Sonnenshein said.

The SEC did not immediately respond to a request for a reaction to Sonnenshein’s comments.

This story is developing. Please check for updates.

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