The SEC can be considered one of the key regulators that decide the fate of cryptocurrency-based products in the United States. The lack of SEC approval has been a roadblock for cryptocurrencies and an end to many businesses dealing with crypto-related products.
Being a hard nut to crack, the SEC has been the hardline gatekeeper that has also made the quest for a Bitcoin ETF unreachable. Concerns about market manipulation and illicit activities have been bothering the SEC and thus it is hesitant on regulating this sector.
A win for Grayscale
However, things have taken a turn for the better as the regulator has officially registered crypto asset management firm Grayscale’s Bitcoin trust as an SEC reporting company, according to an announcement on January 21. The Grayscale Bitcoin Trust (GBTC) is now the crypto-based investment vehicle registered with the SEC.
The company had publicly filed a Registration Statement on Form 10 with the SEC back in November. This was a voluntary filing that would designate the Trust as an SEC reporting company as it is now, and register its shares pursuant to Section 12(g) of the Securities Exchange Act of 1934.
Michael Sonnenshein, managing director at Grayscale Investment said:
“Grayscale voluntarily pursued this designation and will continue to work within existing regulatory frameworks, today’s announcement should signal to investors that our regulators are willing to engage with our products and our space as a whole.”
Upon meeting all relevant requirements under the securities act 90 days from the day of registration, the trust would be able to reduce the statutory period for shares purchased from the trust’s private placement from 12 months to 6 months.
The trust will now have to turn in its quarterly and annual reports, audited financial statements as well as other required forms to the SEC.
GBTC was met with a lot of skepticism by traditional investors when it first started out in 2013. But being an early bird in the industry has allowed it to become one of the most popular investment products tied to Bitcoin. The fund was offered a private placement exemption from SEC registration in 2013, but it decided to pursue this registration voluntarily to boost its compliance standard and gain investor confidence.
Grayscale has seen a lot of volume over the last year as reports stated it took in $608 million in investments in 2019. The last quarter of 2019 saw a whopping $225 million, brought in with its diverse investment products. According to a report from Charles Schwab Corporation, investors preferred to invest in Grayscale Bitcoin Trust more than in The Walt Disney Company, Netflix Inc., and Microsoft Corporation.
Regulation could be the key
Regulated platforms are picking up pace as investors are often scared away by the volatility and risks surrounding the crypto industry. As reported by The Daily Chain, exchanges like CME and Bakkt are have been a hit with institutional investors, with CME doubling its Bitcoin options trading volume in the first week from launch.
Cryptocurrencies are not in the shadows anymore and investor interest in Bitcoin is on the rise. If other institutions follow the path that has been laid down by the GBTC, it would lighten the tension between the SEC and the rest of the industry. SEC compliance would also allow organizations to reach out to a broader audience and draw in the much needed institutional investors.