The SEC’s approval of Grayscale’s Bitcoin Exchange Traded Fund (ETF) would be a big step for the company’s investors, industry partners, and everyone who believes that digital currencies will transform our future.
Grayscale Bitcoin ETF
Grayscale is a digital currency investing services company that provides market information, investment exposure, and investment products to the growing digital asset class.
The company took action concerning the Bitcoin ETF project in October 2021 when it announced that NYSE Arca filed Form 19b-4 with the Securities and Exchange Commission (SEC) to convert its flagship product, Grayscale Bitcoin Trust (GBTC), into a spot-based Bitcoin ETF. It has now been decided that it is significant enough that the SEC has solicited public comments on their decision.
Grayscale’s Chief Legal Officer, Craig Salm addressed some questions concerning the ETF from social media and its investors. He stated what differences the ETF has from the GBTC.
Difference between GBTC and ETF
According to Craig Salm, GBTC is an investment trust that owns over 3.4% of all Bitcoins currently in circulation. As of February 2022, each share of GBTC was backed by 0.00092896 actual Bitcoin. GBTC shares do not own anything other than Bitcoin, nor do the shares employ leverage or the use of derivatives such as Bitcoin Futures contracts.
The ETF on the other hand, its shares would be registered with the SEC under the Securities Act of 1933, which contrasts with how GBTC shares have historically been offered: through a private placement process that is exempt from registration under the ‘33 Act pursuant to Rule 506(c) of Regulation D. This, therefore, makes them initially only available to accredited investors and subject to a six month holding period. GBTC shares today are also not redeemable.
What would it mean if the GBTC conversion was approved?
Craig stated that there are a few things to expect if the conversion to ETF is approved. The first thing would be that GBTC share prices will likely move to trade with Net Asset Value (NAV) because the arbitrage mechanism would be activated through the availability of simultaneous creations and redemptions. Then, the shares would be uplisted from OTCQX to NYSE Arca.
To the investors already holding shares of GBTC Craig assured them :
“Importantly, if you are an investor that’s already holding shares of GBTC you wouldn’t have to do anything. None of this should inherently represent a taxable event for shareholders either.”
He also mentioned that investors can support the process during the open review period by submitting comments to the SEC for consideration and so far over 2,600 comments have been submitted from investors.
