The CEO of the investment firm that manages the world’s largest bitcoin fund heard comments from Securities and Exchange Commission Chairman Gary Gensler on the likely path to approval of the first U.S. bitcoin ETF.
Michael Sonnenshein, CEO of Grayscale Investments, warned Tuesday that the SEC would make a mistake if it granted approval to a bitcoin futures-based ETF rather than one tied to the cryptocurrency itself. His company has tried to turn the massive Bitcoin Trust into grayscale, which owns Bitcoin instead of contracts related to its future price, into an ETF.
“It would be short-sighted by the SEC to allow a futures-based product to be introduced to the market rather than a one-time product,” Sonnenshein told CNBC’s “Squawk Box” on Tuesday. “They should really allow both products to enter the market at the same time and let investors choose the way they want.”
Last month, Gensler noted a preference for reviewing applications from investment firms that wanted to launch ETFs tied to bitcoin futures listed on the Chicago Stock Exchange. This is an alarming development for grayscale, which has tried to turn its trust in bitcoins into an ETF since 2016. The approval of the first bitcoin ETF in the US is considered a cryptographic milestone because it would help the adoption of the nascent asset class.
During the discussion on “Squawk Box” and in a follow-up telephone interview, Sonnenshein warned of possible drawbacks to the SEC’s position. A futures-based ETF would cost investors more in commissions because of the inherent expense of moving futures contracts as they expire, Sonnenshein said.
In addition, investors who want a mutual fund that tracks the price of bitcoin more closely can gravitate toward a futures-based ETF, which could divert capital from the grayscale flagship product, he said. This is one of the main reasons why Grayscale wants to turn its fund, known for its GBTC ticker, into an ETF. As it is currently being built, the fund can operate at a discount or premium on bitcoin itself.
“If a futures-based ETF goes on the market without GBTC’s ability to become an ETF, it has the potential to hurt investors who have GBTC worth tens of billions of dollars, as well as investors who have exposure to GBTC within mutual funds, retirement accounts and other places, ”Sonnenshein said in the telephone interview.
He generally considered the SEC’s position to be bullish for Bitcoin because, if regulators feel comfortable with cryptocurrency-linked derivatives, it suggests they are comfortable with the underlying asset class.
Grayscale’s trust in bitcoins had assets under management of $ 32.4 billion and has more than 3% of the available supply of bitcoin, Sonnenshein said.
The SEC did not immediately respond to a request for reaction to Sonnenshein’s comments.
This story is unfolding. Please check for updates again.
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