Feb. 25, 2022
Original Date: February 22, 2022
Dear SEC,
I’m writing to support the conversion of Grayscale Bitcoin Trust (Symbol: GBTC), currently the world’s largest Bitcoin fund, to the first Spot Bitcoin ETF in the United States.
The mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC strives to promote a market environment that is worthy of the public's trust.
By its reluctance to approve a spot ETF for Bitcoin, the SEC has been clearly harming, and not protecting, investors of Grayscale Bitcoin Trust (GBTC). By approving a futures based Bitcoin ETF (BITO) and not approving the largest spot ETF, GBTC, the SEC is eroding the public's trust in markets as well as the SEC itself by having an indefensible double standard, which is nonsensical given that the futures product pricing is a derivative of the spot. Furthermore, as the spot Bitcoin market becomes more and more liquid and deep on a daily basis as Bitcoin is mined and original ownership becomes more widely dispersed, the SEC's negative stance becomes more profoundly untenable.
Ironically, the futures based bitcoin ETF is actually an inferior product to a spot ETF, which raises uncomfortable questions about whether the SEC has the breadth of understanding to protect investors. The futures based ETF does not track the price of BTC one-for-one due to the futures premium or discount, which is affected by the extent to which institutions participate in the cash and carry trade, among other factors, not least of which is the ongoing likely significant cost of the futures roll. Many within the investor public will not understand that the exposure they are actually getting through the futures ETF is subject to these other risks and fluctuations not inherent to Bitcoin (again undermining trust). In short, an inferior product was allowed to list that could be misleading (and costly) to a large number of investors.
In addition, the SEC is standing in the way of capital formation of the revolutionary blockchain technology, while other countries (Canada, Australia, and Germany, for instance) allow their citizens to participate via spot Bitcoin ETFs.
To be sure, fraud and manipulation are serious issues, but the arguments put forth by the Exchange are valid and give comfort and perspective vis a vis the already approved futures based ETF. These concerns are certainly no worse, and in fact, attenuated for the spot ETF.
Furthermore, regarding fraud and manipulation, there is nothing unique to Bitcoin or a spot Bitcoin ETF. Individual stocks and ETFs such as other commodities-linked funds are subject to similar risks. An example would be many of the SPACs that listed in recent years that made fraudulent and misleading claims to future performance (e.g. NKLA). Bitcoin, with a market capitalization close to $1 Trillion, and being powered by blockchain technology which records all transactions on a public ledger, is much less at risk of manipulation than most other assets and exchange-traded products.
Moreover, illegal activity broadly can always be prosecuted not only by the SEC, but also by other Federal and State authorities. However important the SEC is, it is not the only cop on the beat. All relevant jurisdictions, when viewed in combination, are formidable deterrents to illegal activity.
Clearly, Grayscale Bitcoin Trust's application before the SEC to convert to a spot ETF should be approved. Sincerely,
Paul Matten, Harvard JD-MBA, 1991, Harvard MA, Economics, 1994 Florida, USA