The largest investment fund operator has confirmed that Grayscale will file for the fund to be converted into an ETF as soon as there is regulatory clarity from the SEC.
The approval of an ETF based on Bitcoin has been descibred as a watershed moment for the crypto industry, which would help legitimize the asset among traditional investors. The authorised ETF product’s underlying value is currently tied to futures contracts on the Chicago Mercantile Exchange (CME) and has launched today on the New York Stock Exchange.
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The Communications Director at Grayscale, Jennifer Rosenthal, had been waiting for some time for the SEC to provide clarity. In a Twitter thread, she said:
Today, I’m happy to confirm that Grayscale will file for GBTC to be converted into an ETF as soon as there’s a clear, formal indication from the SEC,
She went on to say that once the SEC provided verifiable evidence of the regulator’s comfort with the Bitcoin market – in the form of a futures ETF – that this would form the basis to file for the process to take place.
Unlike the recent ETF filings tracking futures derivatives, Grayscale would aim at an ETF that is physically backed, also known as a spot ETF. This would be a superior financial product for retail investors as current futures filings include multiple financial intermediaries that will need to make profits. These include the ETF provider, clearing house, futures broker, administrator, auditor, law firms, the CME and hedge funds that would take advantage of the arbitrage opportunities.
If approved,the first-ever spot Bitcoin ETF to hit the US market would be a superior financial product that reduces intermediaries, allowing for better price discovery and reflective value.
Presently, Grayscale allows investors to gain exposure to Bitcoin through a trust called Grayscale Bitcoin (GBTC) which issues shares traded on the US stock market. The fund has over $38.6 billion allocated to GBTC out of the total $52.6 in billion assets under management (AUM).
While GBTC has been an important investment vehicle to keep an eye on, it has drawbacks due to its high barrier to entry. This is due to the way the fund is structured, which until recently had effectively no competition. Shares often trade at a premium or a discount, which can be consequential to the entire Bitcoin market due to its relative size.
By moving to an ETF product, Grayscale will attempt to eliminate price differences, thereby allowing for better price discovery and offering Bitcoin exposure to a wider range of investors.
Rosenthal added it planned to file a specific document with regulators called a 19B-4 to convert their GBTC trust fund into an ETF next week. After the request, SEC should announce its decision in 75 days.
However, Grayscale’s ambitions to launch a spot Bitcoin ETF could face resistance from the SEC. The agency’s chairman, Gary Gensler, earlier said that he was only comfortable with futures-based ETFs.
According to Gensler, futures-based Bitcoin ETFs offer better investor protection. In reality, such products ensure that every intermediary ‘gets a cut’ and have no bearing on investor protection.
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