Grayscale is poised to enter the ETF market on the first day with $20 billion in assets under management, even with the involvement of BlackRock.
Earlier this week, executives from cryptocurrency asset manager Grayscale engaged in discussions with the US Securities and Exchange Commission (SEC) regarding the specifics of transforming its primary Bitcoin trust, with Bitcoin trading at $36,540, into a spot Bitcoin exchange-traded fund (ETF).
On November 20, an SEC memorandum revealed a meeting involving Grayscale CEO Michael Sonnenshein, legal chief Craig Salm, ETF head Dave LaValle, four other executives, and five representatives from the Davis Polk law firm. The discussions centered on NYSE Arca, Inc.’s proposed rule amendment to list and trade shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E.
Grayscale provided details about entering into a Transfer Agency and Service Agreement with BNY Mellon, as outlined in a filing shared by Bloomberg ETF analyst James Seyffart. The agreement designates the bank as the agent for Grayscale Bitcoin Trust (GBTC), responsible for facilitating the issuance and redemption of shares, as well as managing shareholder accounts.
Grayscale had meetings with the SEC’s division of trading and markets yesterday (the division in charge of approving or denying 19b-4’s). Have also heard rumblings of other potential spot #bitcoin ETF issuers meeting with SEC in the last ~week or so. https://t.co/WHs5zxLqVD
— James Seyffart (@JSeyff) November 21, 2023
In a November 21 Twitter post, Seyffart noted that the trading and markets division holds the authority to approve or deny 19b-4s, a form used to notify the SEC of a proposed rule change by a self-regulatory organization.
Seyffart emphasized that Grayscale’s agreement with BNY Mellon was probably an anticipated step and does not necessarily signal an imminent conversion of Grayscale Bitcoin Trust (GBTC).
Grayscale Holds an Edge in Bitcoin ETF
In a post on November 22, Nate Geraci, President of ETF Store, noted that the significant point from Grayscale’s SEC meeting is the reference to GBTC ‘conversion’ being termed an ‘uplisting.’ He highlighted that this doesn’t suggest any challenges with the conversion to an ETF.
Geraci expressed that Grayscale has a substantial opportunity to lead in the ETF category by “uplisting GBTC to NYSE Arca on the same day other issuers launch spot BTC ETFs,” especially if they focus on competitive fees.
According to Geraci, Grayscale is poised to enter the market on the first day with $20 billion in assets under management, even with the involvement of BlackRock.
IMO, most substantive aspect of Grayscale's SEC meeting yesterday (& today's subsequent 8k filing) is that GBTC "conversion" is being referred to as an "uplisting"…
That doesn't indicate any issues w/ conversion to ETF (contrary to the below). https://t.co/yAMBOsRlUs pic.twitter.com/nCZ8Z1ndNO
— Nate Geraci (@NateGeraci) November 22, 2023
Bloomberg ETF analyst James Seyffart stated that despite the recent developments, the odds of approval cannot surpass 90% by January 10th. However, Seyffart noted that progress is still underway in their perspective.
The ETF structure, known for its tax efficiency and cost-effectiveness, is poised to attract wealth managers and financial advisers, heralding a new era of crypto adoption.
The SEC’s possible approval is seen as a redemption opportunity for the digital asset space, especially following the challenges faced after the FTX implosion last year. With industry giants like BlackRock, Fidelity, and Invesco showing interest, the spot-Bitcoin ETF market could grow into a substantial $100 billion market, as estimated by Bloomberg Intelligence.
Notably, Galaxy Digital Holdings Ltd., collaborating with Invesco on an application, recently conducted a call with around 300 investment professionals, emphasizing the growing interest in Bitcoin allocations as the ETF debut approaches.