Grayscale has “finally surrendered” to cash creations in its Resubmits application to convert GBTC into a spot Bitcoin ETF.
On the same day that Barry Silbert, the CEO of Grayscale’s parent company Digital Currency Group, announced his resignation from Grayscale’s board of directors, Grayscale filed an amended S-3 filing with the US Securities and Exchange Commission.
Some crypto market commentators believe Silbert’s departure will increase the likelihood that Grayscale will successfully convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF, which is currently awaiting a decision from the Securities and Exchange Commission.
Lumida Wealth CEO Ramah Luwalia, Silbert’s resignation was most likely voluntary in order to improve the chances of the ETF’s approval — owing in large part to the SEC’s ongoing investigation into Silbert and DCG.
According to Adam Cochran, a partner at crypto venture capital firm Cinneamhain Ventures, Silbert’s decision to step down was “for sure an agreement” reached between Grayscale and the SEC before the conversion request being approved.
Silbert’s departure was announced in an 8-K filing to the SEC on December 26th, with the firm announcing that DCG’s chief financial officer, Mark Shifke, would succeed Silbert as chairman of the board at Grayscale.
According to senior Bloomberg ETF analyst Eric Balchunas, the most noteworthy aspect of the amended S-3 filing—aside from Silbert’s resignation—was that Grayscale had “finally surrendered” to a cash creation model.
The SEC and asset managers hoping to introduce a spot Bitcoin ETF have been at odds over cash vs. in-kind creations.
While the majority of exchange-traded funds (ETFs) based on stocks and commodities operate under the in-kind model, which permits fund market participants to manage the fund’s asset directly, a spot Bitcoin ETF with a cash-creation model restricts the creation and redemption of new shares to cash transactions.
Viewed as an attempt to better track Bitcoin as it moves out of exchanges and reduce any potential risks related to anti-money laundering or Know Your Customer compliance, the SEC moved to prohibit broker-dealers from dealing directly with Bitcoin.
Even though the SEC claims to be for the protection of investors, investors hoping to purchase Bitcoin through a spot ETF may be better off taking a chance on the cash creation model, according to Scott Johnsson, general partner at VB Capital.
Johnsson wrote, “This must be done in a novel way via cash and who knows if that will work, despite all other spot commodity ETFs operating with in-kind models.”
