Coinbase is confident that a U.S. bitcoin exchange-traded fund will be approved by the U.S. Securities and Exchange Commission, the company’s chief legal officer, Paul Grewal, told CNBC.
“I’m quite hopeful that these [ETF] applications will be granted, if only because they should be granted under the law,” Grewal said in an interview with CNBC’s Arjun Kharpal.
The SEC was recently dealt a major court setback when a judge ruled that the regulator had no basis to deny crypto-focused asset manager Grayscale’s bid to turn its huge GBTC bitcoin fund into an ETF.
The SEC last week declined to appeal that ruling by a key deadline, likely paving the way for a bitcoin-related ETF to be approved in the coming months.
“I think that the firms that have stepped forward with robust proposals for these products and services are among some of the biggest blue chips in financial services,” Grewal added.
“So that, I think, suggests that we will see progress there in short order.”
He didn’t say when that’s likely to happen, and added the caveat that any decision would ultimately be up to the SEC.
But, Grewal said, it’s likely now that the SEC will approve a bitcoin ETF soon, highlighting the regulator’s failure in court to block Grayscale from converting its GBTC bitcoin fund into an ETF.
SAN ANSELMO, CALIFORNIA – JUNE 06: In this photo illustration, the Coinbase logo is displayed on a screen on June 06, 2023 in San Anselmo, California. The Securities And Exchange Commission has filed a lawsuit against cryptocurrency exchange Coinbase for allegedly violating securities laws by acting as an exchange, a broker and a clearing agency without registering with the Securities and Exchange Commission. (Photo Illustration by Justin Sullivan/Getty Images)
Justin Sullivan | Getty Images
“I think that, after the U.S. Court of Appeals made clear that the SEC could not reject these applications on an arbitrary or capricious basis, we’re going to see the commission fulfill its responsibilities. I’m quite confident of that.”
A bitcoin ETF would give investors a way to own bitcoin without having to make a direct purchase from an exchange.
That could be more appealing to retail investors looking to gain exposure to bitcoin without having to actually own the underlying asset.
Coinbase would likely benefit from any bitcoin ETF that is ultimately approved. The company, the largest crypto exchange in the United States, is a common stock held in portfolios designed to give investors exposure to crypto.
Not all is rosy in Grayscale’s bid to turn GBTC into an ETF, however.
The asset management firm’s parent company, Digital Currency Group, along with crypto exchange Gemini and DCG subsidiary Genesis, were accused in a lawsuit from New York’s attorney general of defrauding investors of more than $1 billion.
Still, Grewal sounded a positive note on the prospect of additional bitcoin ETFs being approved — sooner rather than later.
“We think that other ETFs are going to be coming online soon enough as the SEC follows the law and is required to apply the law in a neutral way to the applications that are pending,” he said.
Bitcoin has risen about 72% in the year to date, in a comeback by stealth for the world’s biggest digital currency after huge declines in 2022.
There’s been greater investor demand for the token in recent months, as the market reacts to prospect of the Federal Reserve ending its campaign of persistent interest rate rises, and as anticipation builds around the upcoming bitcoin “halving” event, which will see rewards to bitcoin miners reduced by half, thereby limiting the coin’s supply.
Still, trading volumes have declined, as retail investors have become uninterested in engaging in the market in light of a lack of volatility and in response to severe wounds suffered by once-large industry players like FTX, BlockFi and Three Arrows Capital.
FTX collapsed into bankruptcy last year after investors fled the platform en masse because of concerns over its liquidity. The company and its founder, Sam Bankman-Fried, are accused of defrauding investors in a multibillion-dollar scheme. Bankman-Fried is standing trial over these allegations and has pleaded not guilty.
Addressing the trial, Grewal said he was “quite encouraged and quite optimistic that a number of the bad actors in this space are being held to account through criminal trials and through aggressive regulatory actions.”
“We are quite excited that there are a number of developments we think that are just around the corner, or underway even as we speak, that will bring back investor and consumer interest in crypto,” Grewal added.
