The U.S. Securities and Exchange Commission is seeking advice from the public about whether exchange-traded funds linked directly to the price of Bitcoin could be a vehicle for fraud, highlighting concerns about a submission from one of the biggest trusts holding the token.
The regulator issued a notice on Friday calling for members of the public to submit written comment regarding Grayscale Investments LLC's application to turn its Grayscale Bitcoin Trust (ticker GBTC) into an ETF tied to Bitcoin's spot price. The SEC had done the same a few days earlier in a notice regarding another application to launch a Bitcoin ETF, this one submitted by Bitwise.
The notice requested feedback on whether the proposed ETFs would be susceptible to manipulation and fraud, and whether Bitcoin itself could be held to the same standard. The SEC has denied six similar applications since November including those from VanEck, WisdomTree and SkyBridge Capital.
Grayscale's $27 billion fund has been a key way for financial institutions to gain exposure to crypto since its launch in 2013, which is why it has historically traded at a premium to Bitcoin's actual price. However, GBTC now trades at a discount after the surge in crypto prices and the launch of ETFs backed by crypto derivatives on Wall Street.
