SEC Stalls Spot Bitcoin ETFs | Gemini Rejects Genesis Bankruptcy Plan

Regulator lost court battle with Grayscale on Tuesday.

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Nina Bambysheva Senior Reporter, Forbes Money & Markets
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Steven Ehrlich Director, Forbes Digital Assets
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GRAYSCALE WINS LAWSUIT, BUT SPOT BITCOIN FUNDS REMAIN ON HOLD

The U.S. Securities and Exchange Commission deferred decisions on filings from BlackRock, Bitwise, VanEck, Invesco, Valkyrie, Wise Origin and WisdomTree for the first U.S. exchange-traded fund that invests directly in bitcoin, according to documents posted on its website Thursday—just days after a federal appeals court overturned the rejection of Grayscale’s application to convert its bitcoin trust into an ETF.

The court decision does not mean that the SEC must approve Grayscale’s application, only that it must review the application and provide an explanation why it allows ETFs based on bitcoin futures but not spot prices if it rejects it again.

BITCOIN LOSES WEEKLY GAINS

The original cryptocurrency fell 3% on Friday morning following news that the SEC would not consider spot bitcoin ETF applications until mid-October, erasing weekly gains. It is now valued at $25,466, according to CoinGecko.

The overall cryptocurrency market also shrunk on the price decline of bitcoin, falling 3% on the day to $1.08 trillion. Ether, the second largest cryptocurrency by market capitalization, also fell 2.5% to $1,606.

CURRENT PRICE OF TOP 5 COINS (7-Day % Change)

Coin

Price

Percent Change

Bitcoin (BTC)

$25,466

1.9%

Ether (ETH)

$1,606

2.5%

Tether (USDT)

$1

0%

Binance Coin (BNB)

$212

2.8%

USD Coin (USDC)

$1

0%

Source: Forbes Digital Assets. Prices as of 2:33 p.m. on September 1, 2023.

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GENESIS BANKRUPTCY PLAN FACES HEADWINDS

Crypto exchange Gemini and other creditors rejected the proposed settlement between FTX and Genesis, describing it as a “sweetheart pre-plan deal” designed to benefit only Digital Currency Group, Genesis’ parent, at their expense.

Earlier this month, the bankrupt lender agreed to pay FTX’s former trading arm, Alameda Research, $175 million and waive all claims against the FTX estate.

Genesis and DCG announced a separate tentative agreement early on Tuesday to resolve bankruptcy issues with unsecured creditors, but the agreement doesn’t have the support of key stakeholders including Gemini, which accused DCG and its CEO Barry Silbert of “masterminding” fraud against creditors.

WHY DEFI’S WOES MAY BE EXISTENTIAL

These are trying times in the world of decentralized finance, a blockchain-based system of banking and investment that seeks to cut out traditional middlemen and avoid regulatory entanglements.

The allure of automated financial systems and yields that have run as high as 20% has drawn not only legions of investors and developers but also cybercriminals. Since 2019, hackers have raided DeFi protocols nearly 500 times, absconding with $6 billion and proving that smart contracts are no match for smarter miscreants. These issues have become existential in light of DeFi’s rapidly declining market share. Read more.

Also: Can Bitcoin Miners ‘Do’ AI? Not Really

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