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Grayscale considering lawsuit if SEC rules against its BTC Trust conversion

  • The digital assets management firm is not sparing any resources in converting its Bitcoin Trust offering to a Bitcoin ETF
  • Grayscale CEO noted that the firm would go to all lengths to achieve the goal, including a legal battle with the SEC

Pressure is mounting on the US Securities and Exchange Commission (SEC) in regards to a spot crypto ETF approval.

The regulator has stood its ground, rejecting most Bitcoin ETF applications filed by asset managers and other financial institutions. The SEC recently rejected proposals from the Bitcoin-focused investment firm NYDIG and fund management company Global X.

In January, the Gary Gensler-led agency punted (not the first time) on the NYDIG spot Bitcoin ETF proposal before finally delivering the blow this month. Thus far, the list of rejected spot bitcoin ETF applications includes those from Kryptoin, WisdomTree, Fidelity, VanEck and First Trust.

Grayscale is willing to go as far as a legal battle

This series of denials haven't stopped Grayscale from expecting an optimistic outcome. In a Monday Bloomberg interview, the chief executive of Grayscale, Michael Sonnenshein, revealed that the digital currency investing firm was ready to explore the option of a lawsuit if push came to shove.

Responding to a question about whether Grayscale would pursue the Administrative Procedure Act lawsuit path if its application is turned down, Sonnenshein confirmed that it was a possibility.

"I think all options are on the table," he said.

The decision on Grayscale's application filed in October was delayed last month – after another delay in December – with a new deadline set on 06 July.

During the interview, Sonnenshein divulged that the firm had dedicated its resources to facilitating the proposed conversion of its $30 billion flagship investment product into a Bitcoin ETF.

"The Grayscale team has been putting the full resources of our firm behind converting GBTC, our flagship fund, into an ETF," he added. "It's really important that investors know that we have and will continue to advocate for them."

The proposed conversion has support of the public

Early last month, the US financial regulator shared a document highlighting key issues standing in the way of the proposed conversion asking the public to give their opinion. Some of the exchange's concerns were market manipulation, liquidity and transparency of the Bitcoin market, and fraud practices.

"The Commission asks that commenters address the sufficiency of the Exchange's statements in support of the proposal, which are set forth in the Notice in addition to any other comments they may wish to submit about the proposed rule change," a section of the post read.

The majority of comments from the public have been in support of the proposed change.  

Sonnenshein is optimistic that a spot Bitcoin ETF is on the way

Towards the end of last year, many industry experts predicted that the first spot crypto ETF would arrive some time this year. With March almost coming to an end, it is safe to say the approval of such a product has been ruled out in Q1.

Nonetheless, Sonnenshein is confident that the SEC will eventually approve a spot crypto ETF. The chief of the digital currency investing and crypto asset management firm is sanguine that it is a matter of when and not if.

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