By
Bena Ilyas
April 23rd, 2024
While little is known about its fight with the SEC, Grayscale is already preparing for future moves in case it loses the battle.
Grayscale Investments, one of the biggest asset management firms in the digital currency ecosystem is mulling plans to repay its investors should its ETF plans fail.
As reported by the Wall Street Journal (WSJ), the move will be activated if the company, a subsidiary of the Digital Currency Group (DCG) is unsuccessful in its broader bid to push the United States Securities and Exchange Commission (SEC) to approve the conversion of its Grayscale Bitcoin Trust (GBTC) product to a full-fledged Bitcoin Exchange Traded Fund (ETF).
Per the WSJ’s report, the refund will feature options that will include a tender for up to 20% of the outstanding shares of the GBTC product. At the moment, this trust is worth as much as $10.7 billion according to figures quoted by the company’s CEO, Michael Sonnenshein.
The Grayscale Bitcoin Trust is currently down by 49% of its Net Asset Value (NAV), indicating how much of a beating the shares have received over the past few months. Grayscale, alongside some key asset managers, is one of the primary purveyors of the Bitcoin Exchange Fund revolution in the United States.
On a number of occasions, the SEC has frustrated Grayscale’s attempts to get a Bitcoin ETF product approved and after waiting for months, the regulator denied its request to transform the GBTC product to an ETF, citing a lack of regulatory oversight and inappropriate market maturity.
Grayscale did not settle for the feedback from the SEC and hours after, the company filed a lawsuit against the commission. It even went further to hire Donald B. Verrilli Jr as part of its legal team. Donald was a top solicitor during the Obama Administration and riding on his experience and knowledge of the law, Grayscale was optimistic he can solidify its team to get to win the SEC in court.
“It’s paramount that Grayscale has the strongest legal minds working on our application to convert GBTC to an ETF, and we are thrilled that Verrilli will join our outstanding legal team,” a Grayscale spokesperson said at the time.
While little is known about its fight with the SEC, Grayscale is already preparing for future moves should it lose the battle.
Grayscale Troubles Goes Beyond ETF Push
With the digital currency ecosystem experiencing the liquidity turmoil it has been recording since the start of the year, Grayscale and its parent company are duly sharing a good brunt of the pressure.
Genesis Trading, another subsidiary of DCG is said to be owing over $900 million to Gemini clients, a financial turmoil that is placing the company on the brink of bankruptcy. The Genesis strain was induced by the collapse of the FTX Derivatives Exchange, and the platform has revealed that bankruptcy may become inevitable if it is unable to get a cash injection to bolster its reserves.
With Grayscale and DCG being pressed hard this way, GBTC’s transition to Bitcoin ETF may not be their immediate worry.