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Cryptocurrency asset manager Grayscale Investments is lobbying the US Securities and Exchange Commission (SEC) to approve the use of options on spot Bitcoin ETFs. This move could potentially open the product to a new class of investors.
Grayscale CEO Michael Sonnenshein argued in a letter to the SEC that denying options on the Grayscale Bitcoin Trust would be “unfair discrimination” against its shareholders. He noted that the regulator had previously approved options on ETFs linked to Bitcoin futures.
Sonnenshein said access to exchange-listed options on GBTC and other spot Bitcoin ETPs is important to the interests of GBTC and all other spot Bitcoin ETP investors.
The launch of ETFs has opened up BTC to more investors, and asset managers are capitalizing on the excitement by submitting proposals to the SEC for a second wave of more comprehensive crypto products. Some of these proposed products will use options to increase Bitcoin's volatility.
Options, which give the right to buy or sell an asset at a predetermined price by a certain date, could take months to gain regulatory approval for new BTC ETFs.
The SEC, which oversees the technical rule changes exchanges must make to list options, typically approves them days after an ETF begins trading. However, because regulators view BTC as a commodity, spot BTC ETF options may also require approval from the Commodity Futures Trading Commission (CFTC), which oversees commodity derivatives. This can complicate the regulatory process for approval.
Without options, large investors who analysts suggest could attract as much as $100 billion into ETFs could face risk management problems. This can keep many potential investors away.
Sonnenshein stated that options will facilitate price discovery in the shares of new ETFs, helping investors navigate market conditions, hedge risk and generate income. He also noted that options would “bring Bitcoin further into the regulatory environment” by allowing “additional regulated market participants,” such as contract traders and brokers, to trade the product.
*This is not investment advice.