March 2, 2024

Grayscale Pushes SEC for Approval of Spot Bitcoin ETF Options

Grayscale is advocating for the approval of options on its spot bitcoin exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC), aiming to broaden accessibility to a wider range of investors.

Grayscale CEO Michael Sonnenshein has penned a letter urging the US Securities and Exchange Commission (SEC) to greenlight options trading for its Grayscale Bitcoin Trust (GBTC), arguing that denying such options would unfairly disadvantage its shareholders, as reported by Reuters. Sonnenshein highlighted that the SEC has previously sanctioned options trading for ETFs tied to bitcoin futures.

In his letter, Sonnenshein stressed:

β€œIt is vital to the interests of GBTC and all spot bitcoin exchange-traded product (ETP) investors to access exchange-listed options on GBTC and other spot bitcoin ETPs.”

Options contracts grant the holder the right to buy or sell an asset at a predetermined price in the future. Introducing options for a spot bitcoin ETF would allow investors to trade these contracts based on their anticipation of the ETF's price movement.

For instance, investors anticipating a price surge might opt for call options. However, securing approval for these products is not a straightforward process and could potentially prolong for months.

Sonnenshein also pointed out that options trading could facilitate price discovery for the shares of new ETFs, enabling investors to adjust to market conditions, hedge risks, and generate income, according to the report.

Approval of these options would broaden the regulatory framework surrounding bitcoin, permitting more regulated market participants such as contract merchants and broker-dealers to participate in trading these products, Sonnenshein noted.

Crypto industry leaders are already anticipating a transition beyond traditional ETFs, with asset managers expected to integrate a wider array of crypto assets into single investment vehicles in the upcoming year.

Reuters previously reported that delays in options trading for bitcoin ETFs could stem from the lack of a defined regulatory process for their approval.

While the SEC typically approves ETFs shortly after they commence trading, the categorization of bitcoin as a commodity poses a challenge in this instance. Consequently, options for spot bitcoin ETFs may require approval from the Commodity Futures Trading Commission (CFTC) as well.

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