Grayscale Overhauls ETF Pursuit to Cash-Only System as Barry Silbert Resigns

Grayscale Investments, a prominent player in cryptocurrency asset management, is seeking to transform its Grayscale Bitcoin Trust (GBTC) into a Bitcoin Exchange-Traded Fund (ETF). In a recent filing with the United States Securities and Exchange Commission (SEC), Grayscale proposed a cash-only creation system for the ETF, addressing the SEC’s concerns about in-kind creations. The SEC is currently reviewing the proposal, and it remains uncertain whether it will be approved.

This move by Grayscale comes as Barry Silbert, CEO of Grayscale’s parent company, Digital Currency Group (DCG), steps down from Grayscale’s board. Silbert’s unexpected departure has sparked discussions in the crypto community, with some speculating that it may be a strategic move to improve the chances of the ETF’s approval. This speculation arises as the SEC investigates Silbert’s and DCG’s activities.

Adam Cochran from Cinneamhain Ventures suggests that Silbert’s exit could be a planned step in collaboration with the SEC to facilitate the approval of the ETF. This development has led to increased interest in GBTC and ETHE, with investors taking advantage of the higher discount.

Grayscale’s updated filing introduces a change to a cash-creation system for the proposed spot Bitcoin ETF. This shift from the typical in-kind model used in many other ETFs seems to address the SEC’s concerns about anti-money laundering measures and Know Your Customer requirements for digital asset ETFs. Eric Balchunas, Senior ETF Analyst at Bloomberg, notes that Grayscale’s adoption of cash-only creations is significant, as it was previously resistant to this approach.

Scott Johnsson, a finance lawyer and partner at VB Capital, raises concerns about the SEC’s cautious approach, suggesting that their strict rules may inadvertently create new risks for investors and reduce investor protections. The crypto community is closely watching the SEC’s decision on Grayscale’s amended filing, as it represents a crucial step in the company’s efforts to transition GBTC into a compliant spot Bitcoin ETF.