U.S. Congressman Urges SEC Investigation Into Grayscale's GBTC

Congressman Raises Concerns Over GBTC

U.S. Congressman Brad Sherman has raised significant concerns regarding Grayscale Investments and its Grayscale Bitcoin Trust (GBTC). The primary issue revolves around the substantial discount at which GBTC shares are currently trading. Congressman Sherman has urged the U.S. Securities and Exchange Commission (SEC) to investigate these matters thoroughly.

Investor Protection and SEC Involvement

Sherman directly addressed SEC Chairman Gary Gensler, requesting a probe into Grayscale’s business conduct concerning GBTC redemptions. A key point of contention is the 42% discount on GBTC shares, which has alarmed many investors. The Congressman emphasized the need for the SEC's intervention to ensure investor protection.

Grayscale’s Redemption Policies Questioned

The refusal of Grayscale to redeem GBTC shares has been attributed to SEC’s Regulation M, which aims to prevent market manipulation. Despite stopping the sale of new GBTC shares, Grayscale has not allowed redemptions, sparking further concerns. Sherman suggests that Grayscale's reluctance is linked to maintaining its management fees, which amounted to $615 million in 2021.

Role of Digital Currency Group

Sherman also questioned the involvement of Grayscale's parent firm, Digital Currency Group, in the alleged manipulation of the GBTC discount. This adds another layer of complexity and concern regarding the management of GBTC shares.

Future Prospects and Regulatory Authority

A crucial aspect under scrutiny is whether Grayscale’s efforts to convert GBTC into a spot Bitcoin ETF would facilitate shareholder redemptions. Sherman has urged the SEC to explore its regulatory authority to safeguard vulnerable retail investors affected by these issues. The call for SEC scrutiny underscores the pressing need for transparency and accountability in cryptocurrency investments.