Grayscale Investments CEO Michael Sonnenshein is predicting a new era for the crypto industry following a recent victory over the Securities and Exchange Commission (SEC). The District of Columbia Court of Appeals ruled that the SEC was “arbitrary and capricious” in denying Grayscale’s application to convert its Grayscale bitcoin trust into a spot bitcoin exchange-traded fund (ETF). This decision paves the way for increased mainstream acceptance of digital assets by allowing investors to gain exposure to bitcoin without owning it directly. Sonnenshein hailed the ruling as “an overwhelming victory” for Grayscale and the crypto community as a whole.
The success of Grayscale’s application could have positive implications for other asset managers seeking approval for bitcoin products. BlackRock, the world’s largest money manager, filed paperwork in June to create a spot bitcoin ETF and Coinbase would act as the custodian for the bitcoin holdings. However, the approval of spot bitcoin offerings is not yet guaranteed. The court ruling merely requires the SEC to review Grayscale’s application, and the SEC still has until mid-October to request a re-hearing of the case.
The uncertainty surrounding spot bitcoin ETFs might explain why the rally in cryptocurrency companies and digital assets subsided on Wednesday. Bitcoin briefly reached $28,000 following the Grayscale ruling but dropped to around $27,000 on Wednesday. Nevertheless, Bitcoin is still up 64% from the beginning of the year. The stock of Coinbase fell 1.2%, while bitcoin mining firms Marathon Digital and Riot Blockchain were down 3% and 2.4% respectively, after experiencing significant gains on Tuesday.
If Grayscale’s bitcoin trust is allowed to convert into an ETF, it could eliminate the trust’s current discount and potentially increase its value. Additionally, the court ruling only directly impacts Grayscale and does not affect the SEC’s ongoing battles with other crypto actors. The SEC has charged 19 different crypto entities with violations of securities laws since the beginning of 2023, focusing on the registration of cryptocurrencies as securities.
Despite the ongoing legal battles, Sonnenshein remains optimistic about the future of the crypto industry. He believes recent legal decisions and legislative movements in Washington will provide momentum for the industry. The House Financial Services Committee passed legislation that seeks to clarify the jurisdiction of the Commodity Futures Trading Commission (CFTC) and the SEC regarding digital commodities and assets. Sonnenshein sees this bipartisan support as encouraging and believes it could lead to increased stability and acceptance of cryptocurrencies.
Looking ahead to next year, Sonnenshein predicts that the crypto industry could receive another boost when the bitcoin blockchain undergoes a supply cut. This event could potentially raise the price of bitcoin relative to other digital assets, further solidifying the staying power of the asset class.
Overall, Sonnenshein’s outlook for the crypto industry is optimistic, foreseeing an environment around crypto that has yet to be seen before. As the SEC continues to review Grayscale’s application and the legal battles in the crypto industry unfold, the future of digital assets remains uncertain. However, recent developments have provided hope for increased mainstream adoption and regulation of cryptocurrencies.