Grayscale Files Fresh Bitcoin ETF Application While Barry Silbert Steps Down
Grayscale Investments, a prominent crypto asset manager, has filed an amended S-3 document with the United States Securities and Exchange Commission (SEC) to convert its Grayscale Bitcoin Trust (GBTC) into a Bitcoin Exchange-Traded Fund (ETF). This move comes at a time of significant leadership changes, as Barry Silbert, CEO of Grayscale’s parent company, Digital Currency Group (DCG), announced his resignation from Grayscale’s board of directors.
Silbert’s Departure: A Strategic Decision?
Barry Silbert’s unexpected resignation has sparked speculation among analysts in the crypto market. Ram Ahluwalia, CEO of Lumida Wealth, suggests that this decision could be a strategic move to increase the chances of the ETF’s approval. Silbert’s departure coincides with an ongoing SEC investigation into his and DCG’s activities. Adam Cochran, a partner at Cinneamhain Ventures, theorizes that Silbert stepping down may have been a prearranged agreement with the SEC to facilitate the ETF conversion request.
One noteworthy aspect of Grayscale’s amended filing is the shift to a cash-based model for the proposed spot Bitcoin ETF. Eric Balchunas, Senior ETF Analyst at Bloomberg, pointed out that Grayscale had finally agreed to cash-only creations, a significant deviation from the typical in-kind model used by most ETFs based on stocks and commodities.
This change in model is seen as a response to the SEC’s reluctance to approve in-kind creations for digital asset ETFs, primarily due to concerns about anti-money laundering and Know Your Customer compliance.
Grayscale’s decision to embrace cash-only creations is a significant development. It is likely that they have an Authorized Participant (AP) agreement in place, which is a crucial final step in the process. However, it remains uncertain whether they will be allowed to launch on the first day of the Cointucky Derby.
Regulatory Challenges: Balancing Investor Protection and Innovation
Scott Johnsson, a finance lawyer and general partner at VB Capital, criticized the SEC’s approach, arguing that it could lead to less investor protection. He highlighted the irony in the SEC’s stance, noting that its strict rules for digital asset safekeeping could have unintended consequences despite its mandate to protect investors. Johnsson also noted that the SEC’s refusal to approve in-kind creation/redemption amendments could introduce new risks for investors eager to participate in innovative crypto products.
As Grayscale awaits the SEC’s decision, the crypto community is closely monitoring these developments and their potential impact on the wider acceptance and regulation of digital assets. The amended S-3 filing represents a significant milestone in Grayscale’s efforts to transform GBTC, one of the largest Bitcoin investment vehicles, into a more accessible and compliant spot Bitcoin ETF.