Grayscale CEO Calls for Simultaneous Approval of Spot Products to Level the Field

Grayscale CEO Michael Sonnenshein believes the Securities and Exchange Commission (SEC) needs to approve spot Bitcoin (BTC) exchange-traded funds (ETFs) simultaneously. 

Sonnenshein expressed his views during a recent interview with Bloomberg TV, saying that the regulatory body should strive to establish a level playing field for all market participants.

“We’ve publicly been advocates of the fact that when the commission is ready to give the requisite approvals for spot products to come to market, that it should be done all at once—the issuers who are operationally ready to launch their products should come out the gate all at once.” 

He also reaffirmed Grayscale’s readiness to list the Grayscale Bitcoin Trust (GBTC) as an ETF, while committing to lower the expense ratio, which currently stands at 2%, once it begins trading as an ETF.Earlier this year, Grayscale achieved a significant victory against the SEC as it sought to convert its trust into an ETF. However, industry analysts and observers are now speculating about which companies, among the more than 10 applicants vying to launch spot Bitcoin ETFs, will be granted regulatory approval first. The timing of the approval carries significant weight, as it can provide a substantial advantage in terms of attracting investor interest and capital.

Sonnenshein Voiced Concerns About Delaying Garyscale’s ETF

Sonnenshein expressed concern about potential repercussions if the SEC were to deny Grayscale the opportunity to launch its ETF simultaneously with other applicants. 

“It would put them in a terrible spot if they were to disadvantage the hundreds of thousands of investors in GBTC thinking about other products coming to market before it.”

The race for a Bitcoin ETF has extended over a decade, and it may reach a conclusion in the coming weeks as a critical deadline approaches in early January. During this period, regulators will evaluate an application from ARK and 21Shares, with market analysts speculating that if these applicants receive regulatory approval, it could pave the way for others as well.

In-Kind Versus Cash Redemptions

One of the current obstacles that issuers are grappling with revolves around in-kind versus cash redemptions for the funds, a defining characteristic of ETFs. In the case of in-kind redemptions, an ETF issuer exchanges the underlying securities of the fund with a market maker to create and redeem shares, rather than conducting transactions with cash. However, regulatory officials may be hesitant to allow in-kind redemptions for Bitcoin ETFs due to concerns about broker-dealers handling Bitcoin. Consequently, issuers are diligently working to resolve this issue to align with regulatory expectations.Sonnenshein expressed support for the in-kind redemption model.

“Our positioning here is that the model works, it works well, it protects investors, it creates tight spreads, it creates liquidity, and ultimately creates a positive investor experience. As we’re at this pivotal moment to actually finally see spot-Bitcoin ETFs come to market, we shouldn’t be breaking with convention.”