US SEC: Will negotiate with Grayscale on details of spot Bitcoin ETF

The U.S. Securities and Exchange Commission (SEC) has begun talks with Grayscale Investments on the details of the company’s application to convert its GBTC trust product into a spot Bitcoin exchange-traded product (ETF), according to a person familiar with the matter. This could have a significant impact on the crypto industry.

The SEC’s approval of one or more ETF applications is eagerly awaited by the industry, which sees the moment as a milestone that could simplify entry into digital assets for everyday investors. Grayscale has been in touch with the SEC’s Division of Trading and Markets and Division of Corporation Finance since winning the court case, said the person, who requested anonymity because the talks remain confidential.

Both SEC divisions will play a role in developing and approving the company’s ETF application. Grayscale and CoinDesk are part of the same parent company, Digital Money Group.

Grayscale has long had a cooperative relationship with the SEC due to its existing Grayscale Bitcoin Trust (GBTC), but when it tried to launch an ETF for crypto assets, the agency denied it. A U.S. federal court battle ensued, culminating in a panel of judges finding the SEC’s rejection to be “arbitrary and capricious,” and the court ordered the agency to remove its denial. The court’s ruling was finalized last month, sending the application back to the regulator.

“Right now we are simply focused on constructively reengaging with the exchange and the market,” Grayscale Chief Legal Officer Craig Salm said, though he did not elaborate on the details of that interaction.

“There are still some things that need to be worked out,” Salm said in an interview, noting that other applicants for a bitcoin ETF, including financial giants BlackRock and Fidelity, appear to be making progress in the SEC’s talks with them. “Overall, it’s been a good engagement, and it’s just a matter of when, not if.”

When asked two weeks ago what his agency would do next with Grayscale’s application and others, SEC Chairman Gary Gensler said he would not answer while the commission waited for its staff to recommend a course of action. Meanwhile, he released a video early Wednesday highlighting the work of the agency’s corporate finance division — dealing with “rapidly evolving technologies and business models” — that will be at the heart of Grayscale’s application.