The analysts noted that the SEC may have to approve Grayscale’s ETF proposal and potentially other spot-based Bitcoin ETFs in order to maintain regulatory consistency.
JPMorgan Chase & Co (NYSE: JPM) has predicted that the United States Securities and Exchange Commission (SEC) will be compelled to approve spot Bitcoin (BTC) Exchange-Traded-fund (ETF) applications from various asset managers following Grayscale’s favorable court ruling.
Grayscale Investments, a prominent player in the crypto space, had been seeking SEC approval to convert its Grayscale Bitcoin Trust (GBTC) into an ETF for some time. However, Grayscale’s efforts were met with repeated rejections from the SEC, citing concerns related to market manipulation and investor protection.
Grayscale’s persistence in pursuing the ETF conversion led it to challenge the SEC’s decision in a federal court. The court’s ruling which came last month and called for the SEC to review its rejection of GBTC’s ETF conversion, has caught the attention of market observers and industry experts.
JPMorgan’s Insightful Analysis on Grayscale vs SEC Aftermath
The court’s argument, as JPMorgan’s analysts, led by Nikolaos Panigirtzoglou highlights, centers on the lack of justification for approving futures-based Bitcoin ETFs while denying spot-based ETFs. This discrepancy underscores a regulatory challenge, as both types of ETFs are closely linked to the crypto market.
“For the SEC to maintain its position on Grayscale’s proposal to convert the GBTC, it would essentially need to retroactively withdraw its previous approvals of futures-based Bitcoin ETFs. Such a move would carry substantial repercussions for the crypto market and the SEC itself,” the analysts said in a statement.
A retroactive withdrawal of previously granted approvals is a rare and disruptive event in the regulatory landscape. It would entail reversing decisions that were made based on specific criteria and market conditions at the time of approval. JPMorgan’s report suggests that the SEC is likely hesitant to take such a drastic step because it would not only be disruptive but also potentially embarrassing for the regulatory body, as it would imply a flawed regulatory approach in the past.
The analysts noted that the SEC may have to approve Grayscale’s ETF proposal and potentially other spot-based Bitcoin ETFs in order to maintain regulatory consistency.
Analysts Says Court Ruling Not a Game-Changer for Crypto
Spot Bitcoin ETFs offer a different investment approach compared to their futures-based counterparts. It allows investors to hold their positions indefinitely, eliminating the need for periodic rollovers that come with futures ETFs. This characteristic has generated optimism in the crypto market, with many believing that the eventual launch of spot-based ETFs could open the floodgates to mainstream investment.
In contrast to this optimism, JPMorgan’s report suggests that while spot Bitcoin ETFs have been in existence outside the United States for some time, it has failed to attract considerable investor interest.
The report emphasizes that investor appetite for Bitcoin funds, both futures-based and physically backed, has waned since the second quarter of 2021. This period coincided with increased regulatory scrutiny and heightened market volatility, which may have contributed to investor caution.
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