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Grayscale Moves Ahead on Plans to Convert Bitcoin Trust to ETF

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What You Need to Know

  • The NYSE has just filed with the SEC to list the Grayscale Bitcoin ETF.
  • The filing was made just one day after the SEC approved the trading of the first Bitcoin futures ETF.
  • Grayscale CEO Michael Sonnenshein said that approval amounted to “a blessing to the entire Bitcoin market.”

An hour before the first Bitcoin futures ETF started trading on the New York Stock Exchange, Grayscale announced the same exchange has filed with the Securities and Exchange Commission to convert its flagship Bitcoin Trust to a Bitcoin spot ETF.

The Grayscale ETF would trade on the NYSE, which is required to file Form 19b-4 to list a new  ETF.

If allowed, the Grayscale Bitcoin ETF would be the largest Bitcoin-linked fund with nearly $40 billion in assets distributed across 700,000 accounts. Grayscale had previously announced its intention to convert the trust.

“We believe that if regulators are comfortable with ETFs that hold futures of a given asset, they should also be comfortable with ETFs that offer exposure to the spot price of the same asset,” said Dave LaValle, global head of ETFs at Grayscale Investments, in a statement. He was referring to the ProShares Bitcoin Strategy ETF, which started trading Tuesday on the NYSE.

LaValle added that the Grayscale Bitcoin Trust (GBTC) “proves that there’s strong investor demand for physically backed Bitcoin investment vehicles.”

Grayscale CEO Michael Sonnenshein told ThinkAdvisor that the SEC is “inherently giving a blessing to the entire Bitcoin market if they’re blessing the derivative of that market.” The two markets are “inextricably tied to one another.”

With today’s filing by the NYSE — exchanges as well as asset managers must file with the SEC before an ETF can trade — Grayscale joins about a dozen asset managers whose applications to trade an ETF based on spot Bitcoin are pending before the SEC. (More than a handful of firms have also filed to trade a Bitcoin futures ETF.) The SEC has as long as 240 days to decide the fate of the Grayscale Bitcoin ETF.

To date, the SEC has not approved any of the pending spot Bitcoin ETF applications, choosing instead to postpone any decision within the permitted time frame, but deadlines are approaching for several of the filings.

SEC Chairman Gary Gensler and several commissioners have expressed concerns about potential fraud and manipulation in the crypto market, which would impair investor protection and market integrity — the agency’s key responsibilities to uphold. Gensler has also said the agency needs more authority to regulate the exchanges on which Bitcoin trades.

The trading and clearing of Bitcoin futures are regulated by the Commodity Futures Trading Commission (CFTC).