SEC Meets with Grayscale to Discuss Bitcoin ETF Details


Executives from crypto asset manager Grayscale, including CEO Michael Sonnenshein, legal chief Craig Salm, ETF head Dave LaValle and four other executives, along with five Davis Polk law firm representatives, recently met with the Securities and Exchange Commission’s Division of Trading and Markets. The discussion focused on the firm’s proposal to convert its flagship Bitcoin (BTC) trust to a spot Bitcoin exchange-traded fund (ETF).

According to a Nov. 20 SEC memo, the Grayscale team also detailed the Transfer Agency and Service Agreement it had entered with BNY Mellon. The bank will act as the agent for the Grayscale Bitcoin Trust (GBTC), facilitating the issuance and redemption of shares and maintaining shareholder accounts.

Bloomberg ETF analyst James Seyffart observed that the SEC’s Trading and Markets division is in charge of approving or denying 19b-4s — a form used to inform the SEC of a proposed rule change by a self-regulatory organization. Seyffart added that Grayscale’s agreement with BNY Mellon was “likely something that was always going to be required at some point” and isn’t an indicator that the GBTC will soon be converted.

ETF Store President Nate Geraci observed that the most substantive aspect of Grayscale’s meeting with the SEC is that the GBTC “conversion” is being referred to as an “uplisting”. He believes this doesn’t indicate any issues with conversion to an ETF. Geraci believes Grayscale has a real shot of dominating the ETF category if it can “uplist GBTC to NYSE Arca on the same day other issuers launch spot BTC ETFs” and they make a concerted effort to compete on fees.

Grayscale submitted an S-3 form registration statement with the SEC on Oct. 19, which showed its intention to list the shares of GBTC on the NYSE Arca under the ticker symbol GBTC. In October, a U.S. appellate court issued a mandate for the SEC to review its decision to deny Grayscale’s bid to convert the GBTC to a spot ETF. Other major asset managers, including BlackRock and Fidelity, are also seeking SEC approval for spot Bitcoin ETFs.

James Seyffart maintained that “things are continuing to move forward” and his odds of approval — a 90% likelihood that an ETF is approved on or before Jan. 10, 2024 — remained the same. He believes Grayscale will enter the markets on day one with $20 billion in assets under management, even with BlackRock in the mix.

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