key takeaways:
- Donald Verrilli of Grayscale suggested that the leveraged crypto ETF is “an even riskier investment product.”
- The Volatility Shares 2x Bitcoin Strategy ETF, or BITX, became operational last month after being approved by the Securities and Exchange Commission.
The lawyers representing Grayscale have criticized the SEC’s cautious stance on leveraged bitcoin ETFs, asserting that it stifles innovation in the cryptocurrency market. They argue that the SEC should adopt a more proactive approach, recognizing the growing demand for sophisticated investment vehicles in the crypto space.
According to a letter the company tweeted, lawyers for cryptocurrency asset manager Grayscale criticised regulators on Monday for approving a leveraged bitcoin exchange traded fund (ETF) in the midst of the company’s lawsuit over the SEC’s denial of its own spot bitcoin ETF application.
The SEC had previously rejected Grayscale’s request to turn its Bitcoin Trust into an ETF, leading to the company filing an appeal against the organisation for alleged violations of the Administrative Procedures Act.
Don Verrilli, a partner at Munger, Tolles & Olsen, who represents Grayscale, expressed concerns about the Securities and Exchange Commission’s (SEC) recent approval of a bitcoin-related ETF.
In a letter to the US Court of Appeals for the District of Columbia Circuit, Verrilli stated that the SEC’s approval exposes investors to a riskier investment product compared to bitcoin futures ETFs.
Last month, the US securities regulator granted approval for the Volatility Shares’ 2x Bitcoin Strategy ETFGrayscale argued that the Securities and Exchange Commission’s (SEC) decision to allow a leveraged bitcoin futures Exchange Traded Product (ETP) to trade highlights the arbitrary distinction the Commission makes between spot bitcoin ETPs and bitcoin futures.
According to Grayscale, this differential treatment exposes the 2x Bitcoin Strategy ETF to additional risks compared to Grayscale’s proposed spot bitcoin ETP. (BITX) to enter the market. This ETF aims to achieve investment results that correspond to twice the excess return of the S&P CME Bitcoin Futures Daily Roll Index for a single day.
Verrilli referenced the June 15 registration statement of BITX and highlighted its explicit acknowledgment that the product could result in significant losses for investors who lack sufficient knowledge and expertise.
The statement clearly stated that the ETF is suitable only for “knowledgeable investors” who closely monitor their asset performance.
