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Regulating crypto: Grayscale CEO 'encouraged' by meetings with lawmakers

Crypto executives met with lawmakers on Capitol Hill on Thursday in a bid to create new rules of the road for crypto. Grayscale CEO Michael Sonnenshein was in those meetings and spoke with Yahoo Finance's Jennifer Schonberger about how they went. Sonnenshein says he was "encouraged" by the meetings, adding that there's a "ton of optimism." There have been some efforts to pass crypto legislation, including a bill from Senators Lummis and and Gillibrand, of which Sonnenshein says "having this type of momentum around these bills and the frameworks that they provide, these are the types of engagement that we're seeing from members... we've never seen before."

On the ongoing legal fight over Grayscale's bid to convert its Grayscale Bitcoin Trust (GBTC) to an ETF, Sonnenshein says that right now, the company has to be patient, given that the Securities and Exchange Commission has 45 days to review and appeal the judge's ruling.

Transcription de la vidéo

JENNIFER SCHONBERGER: Welcome back. Welcome back to "Yahoo Finance Live." I'm Jennifer Schonberger here on Capitol Hill, where crypto executives continue to push lawmakers for new rules of the road. Joining me here in an exclusive interview is Grayscale CEO Michael Sonnenshein.


Michael, it's great to see you. Thanks so much for joining me.

MICHAEL SONNENSHEIN: It's great to be here. Thanks for having me.

JENNIFER SCHONBERGER: So you just wrapped up meetings with lawmakers on both the Senate and the House sides. What are you hearing when it comes to crypto legislation?

MICHAEL SONNENSHEIN: Well, as an organization that has been coming down to Washington for many, many years at this point, I have to say, we are simply encouraged.

The work that has been done even just over the last 12 months has been really, really groundbreaking. We certainly applaud the work of Chairman McHenry, Congressman Hill, and certainly Senators Lummis and Gillibrand.

As we think about the bills that have been put forward and have come off of committee and are now going to the floor for further vote later on this fall, I think that we have to remember that now more than ever, crypto in Washington has become a nonpartisan issue and that members' understanding of these issues are more important than ever, and they realize that crypto is here to stay.

JENNIFER SCHONBERGER: You mentioned the House, the House Financial Services Committee passed legislation this summer for the first ever crypto framework, as well as for stablecoins. Were you able to chat with the Chair McHenry or other members of the House? What are the prospects for this on the House floor this fall?

MICHAEL SONNENSHEIN: Well, I think many of the folks that have been involved in drafting that legislation and those that have voted for it are really hoping to build on that momentum now that Congress is coming back into session, that they can reengage on these topics and get broader member support for it.

I do think if we look ahead on the calendar, with not only an upcoming presidential election and a variety of other catalysts, now more than ever really is the time for members to be engaging on this issue because again, their underlying constituents are involved in the crypto space. And it's important that we continue to create financial and regulatory frameworks around it.

JENNIFER SCHONBERGER: So that's the House. What about the Senate side? We know that Senators Lummis and Gillibrand have a proposal that they have retooled after FTX. What are you hearing from them? What are you hearing for the prospects in the Senate? And by the way, would the Senate even consider the House's proposal?

MICHAEL SONNENSHEIN: I have to say again, it's a tone of optimism, right. Having this type of momentum around these bills and the frameworks that they provide, these are the types of engagement that we're seeing from members, like we've actually never seen before.

Crypto is becoming an increasingly part of the demographics that support these sitting members. And as we think about not only the upcoming election, but also where these bills stand today, it's really, really important they continue to push forward on getting as much momentum around them as possible.

JENNIFER SCHONBERGER: Will we see anything passed by the end of this year you think?

MICHAEL SONNENSHEIN: I'm optimistic that we absolutely could. If any Congress to date could do it, it certainly could be this Congress.

JENNIFER SCHONBERGER: All right, switching gears slightly, SEC Chair Gary Gensler testified before the Senate Banking Committee earlier this week. And he was asked about your court ruling. The DC Appeals Court basically said that the SEC was wrong to reject your Bitcoin spot ETF.

Chair Gensler says he's reviewing the case, he's waiting for recommendations from staff. What are you hearing from the SEC? Has the SEC come back to you at all?

MICHAEL SONNENSHEIN: Well, so today is actually day 16 of a 45-day process where we actually have to follow the Federal Rules of Appellate Procedure. During this time, the SEC could request a rehearing of the case. And so, it's important that we follow the rules during this 45-day period.

Ultimately, to your exact point, the court order did, in fact, vacate the SEC's denial order for the Grayscale Bitcoin Trust application to convert to an ETF. And so we really are looking forward to a constructive dialogue, like we've always had with the SEC, to really pursue next steps for the ETF conversion as soon as possible and as expeditiously as possible.

JENNIFER SCHONBERGER: Do you expect there'll be some sort of discussion or do you think that the SEC will just try to appeal what was sent down?

MICHAEL SONNENSHEIN: It's really hard to say. During this 45-day period, we have to be patient. We have to wait for the process to play out. But of course, we do look forward to engaging with the SEC at the appropriate time.

JENNIFER SCHONBERGER: Earlier today, Senator Brown, head of the-- chair of the Senate Banking Committee, sent a letter to Treasury Secretary Janet Yellen and SEC Chair Gary Gensler, basically asking these agencies for more disclosure around crypto to better protect consumers. Your thoughts on that. Interesting to see this coming from the Senate Banking Committee chair.

MICHAEL SONNENSHEIN: It is. I have to say, as an organization, that dating back 10 years to our founding, has always prided ourselves on building investment products that are really built upon full and fair disclosures. That it certainly resonates with us that anytime we're bringing investors into investment vehicles that we're pursuing the fullest and fairest disclosures possible. And that really, for us, is the reason why we had the lawsuit against the SEC to begin with.

For GBTC, the largest Bitcoin fund in the world, we've been litigating to try and convert it to an ETF because bringing it into that ETF wrapper would give investors added protections, added disclosures, added reporting obligations. Those are the types of benefits that we want investors to have and ones that we're really supportive of.

JENNIFER SCHONBERGER: Switching gears again slightly, the IMF and the G20 last week at their meetings in New Delhi were really pushing for a global crypto framework, especially around DeFi. They're very concerned that cryptocurrencies pose a risk to the global economy. They are hoping and pushing for members to adopt these principles. Your thoughts on that and whether we could see US regulators, US lawmakers adopt those principles.

MICHAEL SONNENSHEIN: Well, I have to take a step back and look at crypto in its market cap as compared to the broader financial services landscape. It's still quite small. It's still in its infancy. And so to be getting that level of recognition from the G20, from the IMF, actually is a really big milestone. It starts the conversation.

That's a theme that's been really consistent, certainly here in the US with members here on both the House and the Senate who are really engaging with industry leaders like us as a resource for them. And I think the same is true if you look at the G20 or the IMF.

That being said, there's a real opportunity for the US to really assert its dominance as really the center of the capital markets ecosystem on a global level and ensure that we are putting in place the right frameworks, not only just for investor protections, but also that crypto as an asset class can flourish here in the US and not shut the door on innovation.

JENNIFER SCHONBERGER: Michael, thank you so much for your insight. I so appreciate it.