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In a landmark victory for Grayscale Investments against the U.S. Securities and Exchange Commission (SEC), the crypto giant secured the green light for its Bitcoin Trust product. Yet, Peter Schiff, a prominent financial figure known for his Bitcoin-friendly views, has sounded the alarm about potential ramifications on Bitcoin’s market dynamics.
$GBTC becoming a spot ETF is actually bearish for #Bitcoin. Traders can buy GBTC now and sell or short #BTC. Once GBTC becomes an ETF, the discount to NAV goes away. Shareholders could then redeem, forcing GBTC to sell BTC into the market, vastly increasing the tradable supply.
— Peter Schiff (@PeterSchiff) August 29, 2023
When the US SEC initially flagged Grayscale’s application for the GBTC over-the-counter, the primary concern was the product’s potential vulnerability to “fraudulent and manipulative acts.” Grayscale, a titan in the crypto realm, was not deterred. Challenging the SEC’s rejection in court, the company now celebrates its success.
As highlighted by Coingape, the DC Circuit Court ruled that the SEC’s dismissal of Grayscale’s petition to transition its Bitcoin Trust into an Exchange Traded Fund (ETF) was baseless. The decision was rooted in believing the trust wasn’t adequately equipped to deter deceptive practices.
Peter Schiff’s Concern
While renowned for his Bitcoin-friendly stance, Peter Schiff took to social platform X to express his reservations. Schiff emphasized that the transition of GBTC to a spot Exchange Traded Fund (ETF) could have unforeseen consequences on the Bitcoin market dynamics. Grayscale’s potential new product configuration might introduce volatility or disruptions not previously considered.
On the other hand, Jake Chervinsky, Chief Policy Officer of the Blockchain Association, pointed out that while this court ruling is a significant win, potentially leaving the SEC red-faced, the path to a spot Bitcoin ETF product isn’t completely clear yet.
1/ Grayscale's victory over the SEC is *massive.*
It's very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously.
The DC Circuit just delivered a huge embarrassment for the SEC.
But the ETF isn't approved yet 🧵
— Jake Chervinsky (@jchervinsky) August 29, 2023
Grayscale, buoyed by its victory, might now face the challenge of proving that its proposed ETF can stand firm against fraudulent activities, meeting regulatory expectations and the broader financial market’s stability needs.
As Grayscale pushes forward in its ambitions, the broader crypto community will be watching closely, weighing the benefits of increased access and liquidity against potential market dynamics shifts that Schiff and others caution about.
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