Grayscale Met with SEC for Spot Bitcoin ETF Conversion

Grayscale Investments recently held a significant meeting with the Securities and Exchange Commission (SEC) to discuss the transformation of its Grayscale Bitcoin Trust into a spot bitcoin exchange-traded fund (ETF). In this pivotal meeting, which followed Grayscale’s recent filing of a new registration statement with the SEC, the focus was on the potential listing of the product’s shares.

A notable topic during the discussion was the proposed rule change by NYSE Arca, Inc. for listing and trading shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E. This move is part of Grayscale’s ongoing efforts to convert the trust into a spot bitcoin ETF, a significant step in the cryptocurrency investment sphere.

Adding to the regulatory landscape, a D.C. circuit court issued a mandate enforcing its August ruling, which requires the SEC to re-review Grayscale’s application. This legal backdrop underscores the increasing regulatory attention on cryptocurrency-related investment products.

In a strategic partnership, Grayscale and the Bank of New York Mellon (BNY Mellon) have agreed to have BNY Mellon serve as the transfer agent for shares of the trust. BNY Mellon’s role will be crucial, facilitating the issuance and redemption of shares and maintaining shareholder accounts. This collaboration is seen as a necessary step for the advancement of the Grayscale Bitcoin Trust.

Grayscale plans to list the shares on NYSE Arca under the symbol GBTC, with an ongoing issuance of shares upon approval of its S-3 form and a separate 19b-4 filing from NYSE Arca. This intention, first disclosed in the S-3 filing submitted on October 19, represents a significant move in the digital asset management field.

Major asset managers, including BlackRock and Fidelity, are also exploring the opportunity and seeking the SEC’s approval for spot bitcoin ETFs. Their interest indicates a growing institutional acceptance of cryptocurrencies as a legitimate asset class.

ETF Analyst James Seyffart from Bloomberg Intelligence noted rumors of other potential spot bitcoin ETF issuers meeting with the SEC, highlighting the growing competition in this sector. He also emphasized the importance of the SEC’s trading and markets division in approving or denying such applications.

Nate Geraci, President of ETF Store, offered a unique perspective, referring to the GBTC conversion as an ‘uplisting’ and not indicative of any issues with the conversion to an ETF. Geraci pointed out that if Grayscale can efficiently “uplist GBTC to NYSE Arca” simultaneously with other issuers launching spot BTC ETFs, and if they compete effectively on fees, Grayscale could dominate the ETF category. He also highlighted that Grayscale would enter the markets with a significant $20 billion in assets under management.

James Seyffart maintained an optimistic outlook, maintaining a 90% likelihood of an ETF being approved by or before January 10, 2024. This prediction underscores the momentum building in the cryptocurrency ETF space and the keen interest of both investors and regulatory bodies in this evolving market.