Bitcoin ETF Hope Grows: Grayscale's Bold Move Amid CEO Exit

The crypto asset manager Grayscale has taken a big step in securing itself one of the spots slated for Bitcoin Exchange Traded Fund (ETF)s by submitting an amended S-3 filing with the US Securities and Exchange Commission. This action coincided with the departure of Barry Silbert, CEO of Digital Currency Group (DCG), a holding company for Grayscale.

UPDATE: @Grayscale just filed another amended S-3 to convert $GBTC into a #Bitcoin ETF. pic.twitter.com/TKPP9ufa9X
— James Seyffart (@JSeyff) December 26, 2023

Although Silbert’s departure has raised a few eyebrows in the crypto market, many commentators were quick to say that if he left voluntarily, then his exit could help improve both guys ‘chances when it comes to an approval of Grayscale converting from its GBTC digital ETF into a spot BTC-equivalent. The SEC is currently probing Silbert and DCG. He may step down to influence regulators for their final approval.

Given the ongoing SEC scrutiny, Ramah Luwalia, CEO of Lumida Wealth, believes that Silbert’s resignation could positively impact the ETF approval odds. Adam Cochran, a partner at Cinneamhain Ventures, speculates that Silbert’s decision to step down was likely part of an agreement between Grayscale and the SEC preceding the conversion request approval.

Barry's resignation was @Sonnenshein's X-Mas gift.

What to make of @bsilbert resigning from Grayscale?

Grayscale has had 9 meetings with the SEC per the table below (h/t @JSeyff)

Today, there are only allegations against DCG which have not been resolved in a court of law.… https://t.co/d7tZFFAOoU pic.twitter.com/NjjdWq0F3a
— Ram Ahluwalia CFA, Lumida (@ramahluwalia) December 26, 2023

In addition to Silbert’s departure, the amended S-3 filing revealed a noteworthy development – Grayscale’s shift to a cash-creation model. This change caught the attention of Eric Balchunas, a senior analyst at Bloomberg ETF, who described it as Grayscale “finally surrendering” to this model.

Grayscale finally surrendering to cash-only creations, was a big holdout. Pretty sure they have an AP agreement (a crucial last step) so that would check all the boxes. That said, still a mystery whether they will be allowed to go on day one of the Cointucky Derby https://t.co/Wm7TfD3zkP
— Eric Balchunas (@EricBalchunas) December 26, 2023

Grayscale’s Cash-Only Bitcoin ETF Raises SEC Concerns

The gap between cash-based and in-kind creations has long plagued attempts to seek a spot on Bitcoin ETF. Changing to a cash-creation model means that new shares in the ETF can only be created or redeemed through cash transactions. This is different from the norm of most stock and commodity-based exchange-traded funds, which use an in-kind operating methodology.

Furthermore, the SEC’s limits on broker-dealers dealing directly in Bitcoin seek to make tracking easier and reduce the risk of violating anti-money laundering, Know My Customer. But skeptics like Scott Johnsson, general partner at VB Capital, say the cash creation model (dubbed by SEC as a measure to protect investors) could actually increase chances of loss for those looking to get their hands on some Bitcoin through an ETF.

As Grayscale navigates these regulatory waters, the crypto community awaits the SEC’s decision, which could profoundly impact cryptocurrency integration into traditional financial markets.

Furthermore, the author’s views are for reference only and shall not constitute investment advice. Before purchasing, please ensure you fully understand and assess the products and associated risks.