Support for Spot Bitcoin ETF Revs Up as Agency Holds Course

SEC Chair Gary Gensler said he’s “technology-neutral” in a letter to US Rep. Tom Emmer

article-image

Gary Gensler, Chair, US Securities and Exchange Commission | Blockworks exclusive art by Axel Rangel

share

key takeaways

  • SEC Chair Gary Gensler said his agency must consider whether a spot bitcoin ETF is designed to prevent fraudulent and manipulative acts and practices
  • Nearly 100 people have so far weighed in on Grayscale Investments’ proposed conversion of its Bitcoin Trust to an ETF in public comments to the SEC

As the Securities and Exchange Commission refuses to budge on signing off on a spot bitcoin ETF, a growing number of industry participants are urging the regulator to reconsider.

The latest battleground: Grayscale Investments’ proposal to convert its bitcoin trust to an ETF (exchange-traded fund). The firm filed to morph the $28-billion Grayscale Bitcoin Trust (GBTC) to an ETF in October after the first bitcoin futures ETF began trading.

During the SEC’s 240-day review period, which expires in July, the agency is soliciting feedback from the public.

Andrew Farinelli, a private wealth advisor at Embree Financial, wrote to the SEC that the conversion would reduce costs and improve security for bitcoin investors. Chicago-based Embree, which has 85 institutional clients and 300 families, runs about $1.5 billion.

“Their accounts and investment would often be fully protected under the FDIC, it would be custodied at a trusted institution — [such as] Charles Schwab — and investment itself would be safer under the SEC’s regulation of ETFs,” Farinelli wrote. “Lastly…this allows investment professionals like myself to provide the best guidance to their clients and investors at large.” 

SEC Chair Gary Gensler, meanwhile, has given bitcoin ETF hopefuls little reason for optimism. In his latest public comment, Gensler wrote a letter Tuesday to US Rep. Tom Emmer, R-Minn., saying the “different holdings” of bitcoin spot and futures products have led to “different regulatory outcomes.” Gensler is “technology-neutral” on the outcome, he wrote.

“When reviewing bitcoin spot ETPs, the commission must apply all the standards of the Exchange Act, which it has followed in connection with its orders considering previous proposals to list bitcoin spot ETPs,” Gensler wrote. “In particular, the commission must consider if the bitcoin spot ETP proposal is designed to prevent fraudulent and manipulative acts and practices.”

The letter followed a November dispatch to Gensler from Emmer and Rep. Darren Soto, D-Fla., saying the agency’s approval of a futures ETF should equate to a greenlight for a spot product.

“We do not understand the SEC’s views around the perceived material difference in risk profiles, since both the futures and spot bitcoin markets are inherently intertwined and bear the same risks regarding fraud and manipulation,” Emmer and Soto wrote.

The stakes are rising. A survey last month found that the percentage of financial professionals investing client funds in crypto rose from 9% to 15% over the past year. 

Sixty percent cited regulatory concerns as preventing them from making their first or increasing their crypto allocation, while 32% noted the lack of easily accessible investment vehicles, such as ETFs.

The argument of industry powerhouses such as Coinbase is that a spot ETF would lead to an expansion of safe retail investment in bitcoin.

Paul Grewal, chief legal officer at Coinbase, also wrote a letter in support of the conversion in December. 

“We believe investors should have access to GBTC in an ETP format because it offers a tried and tested way for retail investors to gain exposure to bitcoin at prices that closely reflect spot Bitcoin trading prices without holding it themselves,” Grewal wrote.

Grewal joined more than 100 people in writing, with the majority in support of the Grayscale conversion.

“This issue remains a priority for us and we will continue to oversee the SEC in its mission to maintain fair and orderly markets and facilitate capital formation,” Emmer wrote in a Thursday Twitter post.

A spokesperson for Emmer did not immediately return a request for further comment. 

The recent flood of public comments comes after attorneys representing Grayscale Investments called the agency’s decision to approve a futures-based fund and not a spot ETF “arbitrary and capricious.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template.jpg

Research

The BitcoinOS team is the first to have developed and posted a ZK-compressed proof on the Bitcoin network. Other proof verification efforts have been limited to the Signet or testnet deployments. Their work has resulted in the development of BitSNARK, a software library for ZK-compressed fraud proofs on the Bitcoin network. The project aims to provide a horizontal scaling solution, offering a one-stop shop for teams interested in developing a rollup on Bitcoin. This approach shares similarities with the horizontal tech stack scaling in other ecosystems like Cosmos and Optimism, particularly in its focus on simplified verification, bridging standards, and lightweight interoperability.

/

article-image

A16z’s State of Crypto report shows that DeFi has the largest number of daily active addresses, with stablecoins following closely behind

article-image

G2 is delivering real-world performance breakthroughs at 50-100 Mgas/s, Conduit says

article-image

World Liberty Financial’s token sale debuted just as an absurd AI-fueled memecoin captured crypto’s attention

article-image

Coinbase hired History Associates in 2023 to assist in retrieving records from the SEC and FDIC

article-image

Hours after pledging to support Black men’s rights to safely invest in crypto, VP Harris’s Monday night speech mentioned blockchain zero times