Grayscale Hires Former Deputy Attorney General to Help Push Bitcoin ETF Approval

Grayscale Investments has hired a former deputy attorney general to prepare for a potential legal dispute with the SEC if the SEC rejects its application for a bitcoin (BTC) spot exchange-traded fund (ETF) on July 6.

Grayscale has been awaiting a decision from the SEC to convert its $19.8 billion flagship Grayscale Bitcoin Trust (GBTC) into a spot-based ETF since filing with regulators on October 19, 2021.

The SEC has delayed its decision several times, once in December and again in February. A final decision on the application is expected on July 6.

Adding such an arsenal to Grayscale's legal team is a "powerful move," said Jake Chervinsky, policy director at the Blockchain Association, a cryptocurrency advocacy group, and that if the SEC decides to deny approval now, it has little chance of "winning a legal challenge." .

In March, Grayscale CEO Michael Sonnenshein told Bloomberg that his firm would consider filing a lawsuit under the Administrative Procedure Act (APA) if its application for a bitcoin spot ETF was rejected by financial regulators.

He has been an outspoken critic of the SEC. The SEC approved cryptocurrency futures ETF products in October 2021, but has not yet approved its spot ETF products.

The new hire, Donald B. Verrilli Jr., is a former U.S. deputy attorney general who served in the Obama administration from 2011 to 2016. He is currently a partner at the California law firm Munger, Tolles & Olson, which opened its Washington, D.C. office in 2016.

Grayscale explained on Twitter that the attorney has been involved in more than 50 cases before the U.S. Supreme Court, including several that directly involve violations of the Administrative Procedure Act (APA).

He will serve as senior legal strategist, working alongside the firm's attorneys at Davis Polk & Wardwell LLP and in-house counsel, including chief legal officer Craig Salm.

Grayscale described Verrilli as one of the most experienced attorneys in the country with "a solid understanding of legal theory, administrative procedures and the practical affairs of working with the judiciary."

"We are delighted to have him on our team as we pursue a positive resolution for investors and the public."

Meanwhile, Citadel Securities, a market maker that provides liquidity to cryptocurrency ETFs, said it was open to backing cryptocurrency ETFs but would not do so without regulatory approval.

"We'll be ready if these products get approved, but we're taking a measured approach," Kelly Brennan, head of Citadel ETFs, told Bloomberg in an interview.

Market makers are key liquidity providers in the ETF ecosystem because they ensure the continuity and efficiency of ETF trading.

Elsewhere in the world, cryptocurrency-linked ETFs are gaining popularity, with total assets invested in cryptocurrency ETFs and exchange-traded products (ETPs) globally reaching $16.28 billion.

In February 2021, Canada debuted its first Bitcoin ETF, the Purpose Bitcoin ETF, becoming one of the first countries in the world to adopt a spot Bitcoin ETF.

On May 12, Australia launched its first spot crypto ETFs, including Cosmos Asset Management’s bitcoin ETF, and 21Shares’ BTC and ether (ETH) spot ETF. Two more cryptocurrency-backed ETFs launched on Monday, June 6.

In May, Grayscale began trading its first European ETF, the Grayscale Future of Finance UCITS ETF, which is listed on the LSE, Borsa Italiana and Deutsche Börse's electronic trading platform Xetra.