By
Chimamanda U. Martha
April 26th, 2024
The amended ETF application came after a series of meetings between Grayscale and the SEC in December.
Leading asset manager Grayscale Investments has filed an amended S-3 application seeking to convert its Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETF.
Bloomberg analyst James Seyffart confirmed the reapplication with the Securities and Exchange Commission (SEC) on Tuesday, just a few hours after the CEO of the firm’s parent company, Barry Silbert, resigned.
Grayscale Finally Yields to SEC’s Pressure
The amended application came after a series of meetings between Grayscale and the SEC in December, as the next date for a decision by the Wall Street top regulator edges closer. A notable addition to the latest filing was the agreement of Grayscale to a cash-only creation model, a notion that has been a bone of contention between the asset manager and the SEC.
The SEC has insisted that it prefers a cash creation and redemption approach for investors who would acquire a spot Bitcoin EFT upon approval. This model entails that investors can only buy or sell bitcoin ETF using cash transactions.
Asset managers usually operate on an in-kind mechanism, allowing investors to swap a matching securities asset with marker makers to create new ETF shares.
It is clear that the SEC prefers a cash-only creation and redemption model to regulate the ETFs better, as it can trace the Bitcoin transactions from the cash deposit level through exchanges to the asset manager.
Other applicants have yielded to the demands of the SEC before now, with BlackRock, Invesco, and ARK Invest already adding the condition in their amended filings with the regulator. Grayscale remained the only top applicant to accept the clause before it did so in a Tuesday filing.
The Last Piece of the Puzzle?
Although partly unrelated, analysts have speculated that Slibert’s resignation as Digital Currency Group’s (DCG) CEO was the last piece in the puzzle en route to a potential spot ETF approval by the SEC.
Lumida Wealth’s CEO, Ram Ahluwalia, noted in a tweet on Tuesday that Grayscale’s boss, Michael Sonnenshein, received an X-Mas gift with Silbert’s resignation.
According to Ahluwalia, the decision of the DCG founder to step down has raised the odds of the SEC approving Grayscale’s GBTC to spot Bitcoin ETF application. He stated that although Silbert’s resignation was probably not a call by the SEC, it was a decision that would improve Grayscale’s chances of approval.
The SEC has an ongoing legal battle with DCG, led by Barry Silbert. Although not convicted, the plaintiff believes the venture capital firm under its founder committed financial fraud and violated federal securities law. Ahluwalia believes Silbert’s resignation would subside the case and make Grayscale more autonomous.
The SEC would make its next decision on the spot Bitcoin ETF filings on January 10. Analysts have maintained that the odds of approval on the said date are a staggering 90%.
