Digital asset fund manager Grayscale has filed an amended application to convert its GBTC product into an ETF.
As the cryptocurrency warms up to possible approval of the first Bitcoin ETFs in the United States, fund manager Grayscale is scrambling to get in the front row. On Tuesday, the company filed its third amended application to convert its GBTC product into a spot Bitcoin ETF.
Recall that Grayscale in August secured a court victory that mandated the SEC review the firm’s spot Bitcoin ETF conversion request. That ruling increased optimism that the SEC was now willing to give the green light to a spot Bitcoin-based ETF and led to an influx of filings that are now on the brink of approval.
However, ahead of a possible approval between January 8-10, Grayscale is still trying to iron out the details of the proposed fund. According to Bloomberg’s ETF analyst Eric Balchunas, Tuesday’s updated application included clear language on Grayscale adopting a cash-creating strategy.
The strategy requires that the company only receives and pays out cash in exchange for shares in the fund. Although the company would still use the cash to buy and hold spot BTC, it would not pay out or receive bitcoins from customers. The SEC had reportedly mandated this choice for ETF issuers, and Grayscale has now obliged to get in the front row for potential approval.
Yet, it is notable that Tuesday’s filing did not name an authorized participant (AP) for the conversion of GBTC to an ETF. An authorized participant would usually be the first to purchase and trade shares, with Blackrock naming JPMorgan Securities and Jane Street as APs for its spot Bitcoin ETF. Similarly, Valkyrie Investments named Jane Street alongside Cantor Fitzgerald as authorized participants.
Hence, it is noteworthy that while Grayscale’s CEO Michael Sonnenshein, has acknowledged that the company has an AP lined up since 2017, the firm did not name a single entity in its latest filing. It is still unclear, though, whether the absence of a clearly defined AP in the latest amendment will disqualify Grayscale from getting approval from the SEC.
New Grayscale amendment just dropped. Clear language on cash only but still no AP named, just blanks where name should go. Not sure why since SEC wants to see it and they have been pretty cocksure about having one. Also, nothing on fee (that I could see). That's big open q too. https://t.co/tQ9MTBlvg8 pic.twitter.com/id8Tb8ImaP
— Eric Balchunas (@EricBalchunas) January 2, 2024
Grayscale’s GBTC product currently boasts $26 billion in assets under management (AUM) with a 2% management fee. However, a conversion to an ETF would most likely lower the fees as a result of competition.
Additionally, it will make the fund more liquid for investors using it as a vehicle to get exposure to BTC. For most of its history, GBTC has traded at a premium or discount, making it less efficient for tracking Bitcoin’s price.
Bitcoin Races Past $45,000
Anticipation of a spot Bitcoin ETF has been one of the factors driving Bitcoin’s price since 2023. Unsurprisingly, rumors that the filings could be approved as early as this week have also had a corresponding impact on the cryptocurrency’s price.
Having opened for the year at around $42,000, the price of BTC has surged over 7%, trading as high as $45,870 in the hours leading up to press time. Multiple predictions are that Bitcoin will cross $50,000 in January, reclaiming a $1 trillion market cap in the process.
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