December 1, 2023 at 17:02 GMTModified date: December 1, 2023 at 17:42 GMT
December 1, 2023 at 17:02 GMT

Grayscale pushing hard for spot Bitcoin ETF after SEC talks

The world’s leading crypto asset manager Grayscale seems to be pushing for a spot Bitcoin ETF approval from the US regulatory authorities.

Grayscale pushing hard for spot Bitcoin ETF after SEC talks

The world’s leading crypto asset manager Grayscale seems to be pushing for a spot Bitcoin ETF approval from the US regulatory authorities. It reportedly met the Securities and Exchange Commission (SEC) again this week.

A previous meeting with the regulator had led to the filing of a new preliminary prospectus for its plans to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF) on 22 November.

Recently, on 29 November, the company updated its GBTC agreement in preparation for the spot Bitcoin ETF conversion. It was the first time that Grayscale had updated the trust agreement since 2018.

As reported by ETF Store president, Nate Geraci, on 1 December, details are still being fleshed out. He remained optimistic about the matter “approaching the finish line”, as he pondered on how these meetings would play out:

“I picture Sonnenshein walking in w/ a fruit basket and being like ‘Sorry about the lawsuit and all. Water under the bridge! Now about that conversion.’”

Preparing well for the Bitcoin ETF

Grayscale had altered its agreement last month in order to optimise the fund’s structure for an anticipated “uplisting” to a spot Bitcoin ETF. It brought in two key amendments, as per the filing. 

The first proposal would change how frequently the fund fees are paid from monthly to daily. Here, the firm would maintain discretion on the timing of payment. It would also not change the fee amount, but only the payment frequency.

Grayscale currently charges a 2% management fee for GBTC. Firms awaiting approval for spot Bitcoin ETF products have fees ranging from 0.7% to 1%.

The second thing to be proposed was to allow some trust assets to be temporarily held in omnibus accounts to facilitate more efficient creation/redemption of shares. This could result in some commingling with third-party assets and comprises part of Coinbase Custody’s service.

While these changes are not prerequisites for a potential GBTC spot ETF conversion, it might provide operational efficiencies for the same. Grayscale had recommended shareholders to vote in approval of both the proposals. 

Many others in line

Grayscale is not the only one standing in line to get its ETF approved by the US regulatory watchdog. There’s also the application from ARK and 21Shares for a spot Bitcoin ETF.

Since Ark Invest holds a large stake in the Grayscale fund, it is likely that it would use it to kickstart its own ETF.  Bloomberg senior ETF analyst, Eric Balchunas, commented on the same saying:

“ARK/21Shares has ace up sleeve in the Bitcoin ETF Derby as it likely to move $130m out of GBTC and into ARKB.” 

Another Bloomberg ETF analyst, James Seyffart, predicted that approval would come in early January: “Okay the window for potential spot Bitcoin ETF approval is looking like its gonna be between Jan 5 & Jan 10 2024.”

Bloomberg analysts have maintained their predictions of a 90% approval probability early next year. However, the SEC is notoriously known for stalling its decision on applications. Recently, it delayed a decision on Hashdex’s application to convert its existing Bitcoin ETF into a spot vehicle. 

Grayscale’s application for a new futures-based Ether ETF was also met with the same fate. Both of them had filed their respective applications in the month of September. Their initial deadlines for a decision were marked as 17 November before being delayed.

Franklin Templeton is another Bitcoin ETF applicant which had a 17 November decision deadline. However, it will have to wait until 2024, along with other companies.

Leading asset manager BlackRock also got the opportunity to have another meeting with the SEC’s Trading and Markets division this week. This was to present a revised in-kind model relating to redemption flow. This division is responsible for approving or denying ETF applications. 

As per filings, the latest company to submit an application for a spot Bitcoin ETF was Pando on 29 November.