The landscape of cryptocurrency investment in the United States experienced a pivotal shift recently, thanks in part to a significant legal victory by asset management firm Grayscale. This change was acknowledged by Gary Gensler, chairman of the United States Securities and Exchange Commission (SEC), in a recent interview with CNBC’s Squawk Box.
Grayscale's Legal Triumph and the SEC's Changing Perspective
On January 12, Gensler admitted that the outcome of Grayscale’s lawsuit was instrumental in the SEC's decision to approve spot Bitcoin exchange-traded funds (ETFs).
Bitcoin’s current price stands at $42,789, reflecting the volatility and heightened interest in this sector. Despite the SEC's history of rejecting similar applications since 2013, Gensler pointed to the August 2023 court decision that sided with Grayscale as a turning point.
“We had disapproved a number of these [applications for a spot Bitcoin ETF] over the years, and something had changed. I’m a deep believer in the rule of law and respect for the courts, and taking a new court decision into consideration, we move forward.This statement underscores a new era in the SEC's approach to cryptocurrency, signaling a willingness to adapt in light of legal precedents.
I think this is the most sustainable path forward,” said Gensler.
From Rejection to Recognition: The Journey of Spot Bitcoin ETFs
The path to this landmark decision was fraught with challenges.
In June 2022, the SEC denied Grayscale's application to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF, citing concerns about potential fraud and manipulation. Unyielding, Grayscale took legal action, eventually winning a major victory on August 29, 2023, when the court ruled the SEC’s reasons for denial were insufficient.
This ruling necessitated a reassessment by the commission. This legal success paid off handsomely for Grayscale. On January 10, the SEC approved 10 ETFs with Bitcoin as the underlying asset. The inaugural trading session was noteworthy, with Grayscale's GBTC generating a staggering $2.3 billion in trade volume, nearly half of the day's total volume of $4.5 billion, as per Yahoo Finance data.
BlackRock's iShares Bitcoin Trust (IBIT) also made a strong showing, with approximately $1 billion in trading volume. BlackRock CEO Larry Fink, speaking with CNBC’s Squawk Box, expressed his belief in cryptocurrency as an asset class, differentiating it from its function as a currency.