Usually, people at the highest levels of government are slow to understand or accept cryptocurrency and the blockchain. However, every once in a while they get it right. That’s why progress will be gradual, but inevitable, for Bitcoin and other crypto assets in the U.S.

Last year, a fund manager known as Grayscale sued the Securities and Exchange Commission (SEC) because the SEC rejected Grayscale’s application for a spot Bitcoin exchange traded fund (ETF). By “spot,” I mean that the proposed ETF would be backed by actual Bitcoin holdings, rather than by Bitcoin futures.

The proposed ETF would trade under the ticker symbol GBTC – but again, the SEC denied Grayscale’s application. This was disappointing and infuriating to cryptocurrency and blockchain advocates, as the SEC’s “concerns about investor protections and other issues” excuse didn’t pass the common-sense test.

After all, there are plenty of highly risky ETFs currently available to the public. There are double-leveraged and triple-leveraged ETFs, for example, which move two or even three times as fast as an already volatile underlying commodity or index (such as natural gas or the VIX volatility index).

Yet, somehow the SEC determined that a non-leveraged spot Bitcoin ETF would be too risky for the public. Or, is it possible that government officials felt threatened by the popularity and progress of non-government money?

Courtesy: Yahoo Finance

Among other contributing factors, the SEC’s rejection of a spot Bitcoin ETF is what has kept the Bitcoin price below the key $30,000 resistance level. As the old saying goes, however, resistance levels are meant to be broken.

It’s no accident that Bitcoin leaped toward $28,000 recently, as word spread that an appeals court judge sided with Grayscale against the SEC. Specifically, the District of Columbia Court of Appeals ruled that the SEC acted arbitrarily when it denied Grayscale’s application to convert the Grayscale Investment Trust into an ETF.

They key word here is “arbitrarily.” Powerful regulators can use phrases like “investor protections and other issues” to favor certain markets while suppressing others at their whim. So, it’s alarming but perhaps not surprising when regulators stonewall relatively new technologies that deliver control to the people instead of to governments and their fiat currencies.

Granted, the appeals court’s ruling isn’t necessarily the end of this unfolding story. For example, the SEC could appeal to the Supreme Court to reverse the appeals court’s decision. Also, the SEC can find other grounds/excuses to reject Grayscale’s proposed spot Bitcoin ETF.

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    Ultimately, however, that would just delay the inevitable. Blackrock, a gigantic traditional fund manager, applied for its own spot Bitcoin ETF in June. The SEC would have a tougher time rejecting Blackrock than a much smaller player like Grayscale, no doubt.

    Blackrock wouldn’t apply for a spot Bitcoin ETF on a whim. Make no mistake about it: Blackrock put a lot of forethought and research into the viability of such an ETF, including its chances of being approved sooner or later.

    Courtesy: @paulbarrontv

    Yet, for the time being, the SEC must save face as it’s not accustomed to losing. Surely, it’s not just a coincidence that immediately after the appeals court’s ruling, the SEC issued an alert to “confused” investors about the dangers of ETFs.

    That’s an interesting choice of words. Evidently, the SEC perceives retail investors as “confused” rather than as adults with the freedom to choose how they’d like to allocate their capital. There’s really no confusion here, though, except when it comes to arbitrary rejections of certain funds.

    It’s hard to establish a timeline for any proposed spot Bitcoin ETF’s likely approval. For now, though, at least Grayscale CEO Michael Sonnenshein can declare victory in the short term.

    “This is a historic milestone for American investors, the bitcoin ecosystem, and all those who have been advocating for bitcoin exposure through the added protections of the ETF wrapper,” Sonnenshein stated. I tend to agree, and expect to see more milestones reached before the year is over.

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