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Grayscale met with SEC to discuss spot Bitcoin ETF details

November 22, 2023 Coin Telegraph

Bitcoin

Grayscale executives and lawyers met with the SEC to discuss a rule change to list the Grayscale Bitcoin Trust (GBTC).

Executives from crypto asset manager Grayscale have met with the Securities and Exchange Commission to discuss details of its flagship Bitcoin (BTC) trust, which the firm wants to convert to a spot Bitcoin exchange-traded fund (ETF).

A Nov. 20 SEC memo disclosed Grayscale CEO Michael Sonnenshein, legal chief Craig Salm, ETF head Dave LaValle and four other executives, along with five Davis Polk law firm representatives, met with the SEC’s division of trading and markets.

The memo said discussions “concerned NYSE Arca, Inc.’s proposed rule change to list and trade shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E.”

Grayscale detailed that it had entered a Transfer Agency and Service Agreement with BNY Mellon, according to a filing shared by Bloomberg ETF analyst James Seyffart.

The bank will act as the agent for its Grayscale Bitcoin Trust (GBTC), facilitating the issuance and redemption of shares and maintaining shareholder accounts.

In a Nov. 21 X (Twitter) post, Seyffart observed the trading and markets division is in charge of approving or denying 19b-4s — a form used to inform the SEC of a proposed rule change by a self-regulatory organization.

Seyffart added Grayscale’s agreement with BNY Mellon was “likely something that was always going to be required at some point” and isn’t an indicator that the GBTC will soon be converted.

Since it feels like everyone is asking. Events of the last few days haven’t changed my & @EricBalchunas’ odds. We can’t go any higher than 90% by Jan 10th. That said, things are continuing to move forward in our view.
— James Seyffart (@JSeyff) November 21, 2023

In a Nov. 22 X post, ETF Store President Nate Geraci opined the “most substantive aspect of Grayscale’s SEC meeting yesterday is that GBTC ‘conversion’ is being referred to as an ‘uplisting.’”

“That doesn’t indicate any issues with conversion to ETF,” he said.

Grayscale has a real shot of dominating this ETF category if it can “uplist GBTC to NYSE Arca on the same day other issuers launch spot BTC ETFs,” and they make a concerted effort to compete on fees, Geraci added.

IMO, most substantive aspect of Grayscale's SEC meeting yesterday (& today's subsequent 8k filing) is that GBTC "conversion" is being referred to as an "uplisting"...

That doesn't indicate any issues w/ conversion to ETF (contrary to the below). https://t.co/yAMBOsRlUs pic.twitter.com/nCZ8Z1ndNO
— Nate Geraci (@NateGeraci) November 22, 2023

Geraci said Grayscale will enter the markets on day one with $20 billion in assets under management, even with BlackRock in the mix.

Grayscale submitted an S-3 form registration statement with the SEC on Oct. 19, which showed its intention to list the shares of GBTC on the NYSE Arca under the ticker symbol GBTC.

In October, a U.S. appellate court issued a mandate for the SEC to review its decision to deny Grayscale’s bid to convert the GBTC to a spot ETF.

The firm is among other major asset managers, including BlackRock and Fidelity, seeking SEC approval for spot Bitcoin ETFs.

Seyffart maintained that “things are continuing to move forward” and his odds of approval — a 90% likelihood that an ETF is approved on or before Jan. 10, 2024 — remained the same.

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Grayscale submits SEC filing to convert Ethereum Trust to spot ETF

October 2, 2023 Coin Telegraph

Coin Telegraph

Crypto asset manager Grayscale has filed an application with the U.S. SEC to convert its Ethereum Trust to a spot Ethereum ETF.

Following the approval of the first Ether (ETH) futures exchange-traded fund (ETF), Grayscale Investments is looking to convert its Grayscale Ethereum Trust to a spot Ether exchange-traded fund (ETF).

The New York Stock Exchange Arca filed for the conversion with the United States Securities and Exchange Commission (SEC) on Oct. 2. Grayscale’s existing trust invested in Ether futures contracts as an indirect means of exposure to ETH, but a spot ETF will invest in the underlying asset itself.

@Grayscale has filed to convert Grayscale Ethereum Trust to a spot ETF. $ETHE

Thank you for your continued support -- our team is just getting started! https://t.co/3nNtfe4Nns
— Sonnenshein (@Sonnenshein) October 2, 2023

Grayscale CEO Michael Sonnenshein announced the move on X (formerly Twitter) and highlighted the firm’s intent to provide conventional investment products offering exposure to cryptocurrency assets:

“As we file to convert ETHE to an ETF, the natural next step in the product’s evolution, we recognize this as an important moment to bring Ethereum even further into the U.S. regulatory perimeter.”

The Grayscale Ethereum Trust was launched in March 2019 and went on to become an SEC reporting company in October 2020, giving the public direct insight into the performance of its cryptocurrency investment vehicle.

At the time of writing, the Ethereum Trust is valued at $4.9 billion and accounts for around 2.5% of circulating ETH. Grayscale also reports that 250,000 investor accounts have exposure to the trust.

Grayscale also indicated that it remains committed to taking its cryptocurrency products through an “intended four phase lifecycle” ending with a conversion to an ETF. The platform currently offers 17 different cryptocurrency investment products.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

Grayscale asks SEC to meet on ‘way forward’ for Bitcoin ETF conversion

September 6, 2023 Coin Telegraph

Bitcoin

“We believe the Trust’s nearly one million investors deserve this fair playing field as quickly as possible,” Grayscale's lawyers wrote to the regulator.

Grayscale has told the Securities and Exchange Commission it has no legal reasoning left to block the conversion of the asset manager’s flagship Bitcoin (BTC) fund to a spot exchange-traded fund (ETF).

On Sept. 5, Grayscale’s lawyers sent a letter to the SEC requesting the pair meet to discuss the next steps following the regulator’s court loss regarding the conversion of the Grayscale Bitcoin Trust (GBTC).

“Now that the Court of Appeals has spoken, there is no available rationale that would distinguish a Bitcoin futures ETP from a spot Bitcoin ETP under the legal analysis previously adopted by the Commission in rejecting spot Bitcoin ETPs.”

Grayscale added it believes the SEC should conclude there are "no grounds" for treating the GBTC differently from Bitcoin futures ETFs whose filings "the Commission has previously approved."

On Aug. 29, a United States Appeals Court ruled against the SEC’s denial of Grayscale’s application to convert its GBTC to a spot Bitcoin ETF.

*Screenshot of the letter sent to the SEC by Grayscale’s retained law firm Davis Polk. Source: Grayscale*

Grayscale said if there was any other reason for rejecting the conversion besides the Exchange Act’s requirement that rules be “designed to prevent fraudulent and manipulative acts and practices,” it would have already been made apparent.

“We are confident that it would have surfaced by now in one of the fifteen Commission orders that rejected spot Bitcoin filings even after Bitcoin futures ETPs began trading,” Grayscale wrote.

Grayscale added its fund conversion application has been pending for nearly three times longer than the length of time stipulated by the SEC’s rules.

Joseph A. Hall — who also penned Grayscale’s letter in July urging the SEC to approve all pending ETF applications together — concluded his latest letter by saying:

“We believe the Trust’s nearly one million investors deserve this fair playing field as quickly as possible.”

Since the Aug. 29 court ruling the GBTC discount — the percentage showing how far off an ETF is trading above or below its net asset value — has fallen to 19.9%.

GBTC’s discount was nearing negative 50% during the bear cycle bottom following the FTX collapse in December 2022.

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MicroStrategy to stay on Bitcoin course even if spot ETFs approved: Saylor

August 3, 2023 Coin Telegraph

Bitcoin

Michael Saylor compared his firm to a “sportscar,” whereas a spot ETF will be like a “supertanker” when it comes to giving investors Bitcoin exposure.

MicroStrategy co-founder Michael Saylor believes his firm will remain an enticing way for investors to gain exposure to Bitcoin (BTC) regardless of any future exchange-traded fund approvals.

He has also confirmed his firm’s intention to continue adding more Bitcoin to its balance sheet, including with the potential proceeds of a planned $750 million share sale.

Speaking to Bloomberg on Aug. 2 on how an approved spot Bitcoin ETF could impact his firm’s offering, Michael Saylor was confident MicroStrategy would still be able to offer something spot Bitcoin ETFs can't.

Consider a #Bitcoin Strategy. pic.twitter.com/MJcGxiVHop
— Michael Saylor⚡️ (@saylor) August 2, 2023

He made similar comments during the Aug. 1 earnings call, saying that MicroStrategy will still be “differentiated as a particular Bitcoin operating strategy” when spot ETFs arrive.

Bitcoin is up 145% since the company started its purchasing strategy in August 2020, he said, adding that his firm uses leveraged investments to generate yields that are passed to shareholders.

“We can tap into leverage because we’re an operating company, which an ETF couldn't do so we view it as being beneficial to the entire ecosystem.”

On the other hand, Saylor said spot Bitcoin ETFs would allow large hedge funds and sovereigns to come into the space with billions of dollars.

“We are a unique instrument, we are the sportscar whereas the spot ETF is going to be the supertanker.”

“Spot ETFs will serve another set of customers in a synergistic fashion to grow the entire asset class,” he added at the earnings call.

The firm has more than 470 institutional shareholders, according to Fintel, and a market capitalization of $5.3 billion.

On Aug. 2, analysts raised spot Bitcoin ETF approval chances in the United States to 65%.

Saylor confirmed the goal is to “accumulate as much Bitcoin as we can,” when asked how much their existing holdings of 152,800 BTC will increase in the quarters to come.

He also confirmed that the company intends to sell up to $750 million in class A common stock as per a recent SEC filing, adding that the primary use of proceeds “generally is just to acquire Bitcoin.”

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Bitcoin ETF would be the ‘seal of approval’ from SEC: Mike Novogratz

July 13, 2023 Coin Telegraph

bitcoin etf

The Galaxy Digital founder believes approval of a spot Bitcoin ETF would essentially be a United States regulator and government nod for Bitcoin.

The approval of a spot Bitcoin (BTC) exchange-traded fund (ETF) would equate to a “seal of approval” for Bitcoin from the United States government and its securities regulator, says Mike Novogratz.

In a July 12 interview with Bloomberg TV the founder of crypto investment firm Galaxy Digital spoke about the multiple spot Bitcoin ETF filings before the Securities and Exchange Commission (SEC), including one from the $10 trillion asset manager BlackRock.

“What I do think is BlackRock, Invesco [and] the group of ETF providers is a real signal that adoption is coming,” Novogratz said.

He added many are “nervous” about investing in crypto and the approval of a spot Bitcoin ETF would be an “easy first step” for most to start investing in the asset.

“I just think if it happens it's the seal of approval from the SEC and the U.S. government.”

Novogratz explained there is a “giant infrastructure” in place for the ETFs. Along with BlackRock, proposed ETFs from Valkyrie, Invesco, VanEck, WisdomTree, Fidelity and a joint fund by ARK Invest and 21Shares are also lined up for approval. Novogratz believes that many of these will likely end up being approved.

“The SEC is not going to approve one so you're going to have these giant sales forces out there giving access to people that didn't have access before.”

SEC chair Gary Gensler has previously claimed that “everything other than Bitcoin” falls under his agency’s purview and other crypto projects “are securities" as there are typically known developers and profits are anticipated based on their work.

Novogratz was evasive when asked his thoughts on if Galaxy and Invesco’s spot Bitcoin ETF would be able to list before the end of the year.

“This SEC has been really stubborn and really tough on crypto,” he said.

“No one of significance has gotten through the listing process. We are in that process and it has been a long and frustrating path. I'll leave it at that,” he added.

“I think we're probably going to need either a change of heart at the SEC or a change of administration to see real progress in crypto regulation here in the U.S.”

Novogratz predicted the price of Bitcoin will end the year at a high. “If you take out the top we’ll have a nice leg up,” he said.

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Grayscale hires former Solicitor General to help force Bitcoin ETF approval

June 8, 2022 Coin Telegraph

approval

Ahead of the July 6 SEC decision, the investment giant has hired Don Verrilli, a former U.S. Solicitor General as a senior legal strategist, working alongside its attorneys at Davis Polk & Wardwell LLP and its in-house counsel.

Grayscale Investments has hired a former U.S. Solicitor General in preparation for a potential legal spat with the U.S. Securities and Exchange Commission (SEC), should the regulator reject its application for a spot Bitcoin (BTC) exchange-traded fund (ETF) on July 6.

The company has been waiting on a decision from the SEC to convert its flagship $19.8 billion Grayscale Bitcoin Trust (GBTC) into a spot-based ETF, since filing its application to the regulator on October 19, 2021.

The SEC has pushed back its decision on multiple occasions, once in December and again in February. A final decision on the application is expected on July 6.

Jake Chervinsky, head of policy at the crypto advocacy group Blockchain Association said adding such firepower to Grayscale’s legal team was a “strong move”, and that the SEC would have little chance of "surviving a legal challenge" if it decided to knock back approval now.

Strong move. @Grayscale means business.

The SEC's deadline to approve or deny the application to convert GBTC to an ETF is July 6. No doubt, it should be approved. I don't see how the SEC survives a legal challenge if not, especially one led by Don Verrilli.

Mark your calendar. https://t.co/ZbZ7oTXhHR
— Jake Chervinsky (@jchervinsky) June 7, 2022

In March, Grayscale CEO Michael Sonnenshein told Bloomberg that his firm would consider a lawsuit under the Administrative Procedure Act (APA) should the application for its Bitcoin Spot ETF be denied by the financial regulator.

He has been a vocal critic of the regulator, which approved crypto futures ETF products in October 2021 but is yet to do so for a spot ETF equivalent.

Donald B. Verrilli Jr., the new hire, is a former U.S. Solicitor General who served from 2011 to 2016 under Barack Obama’s administration. He is currently a partner in Californian law firm Munger, Tolles & Olson, and founded its Washington D.C. Office in 2016.

On Twitter, Grayscale explained that the lawyer has been involved in more than 50 cases before the U.S. Supreme Court, including several that dealt directly with Administrative Procedure Act (APA) violations.

He will serve as a senior legal strategist, working alongside its attorneys at Davis Polk & Wardwell LLP and its in-house counsel, including Craig Salm, who serves as chief legal officer.

Don’s legal acumen is unmatched. There’s no better advocate we could have to join our legal strategy team with @DavisPolkReg as we continue advocating to convert $GBTC to a spot #Bitcoin ETF. https://t.co/ZruXc1aiQ6
— Craig Salm (@CraigSalm) June 7, 2022

Grayscale described Verrilli as one of the nation’s most experienced attorneys with “a deep understanding of legal theory, administrative procedure, and the practical matters of working with the judiciary branch.”

“We are thrilled that he is joining our team as we work towards a positive resolution for investors and the general public.”

As we enter the final month before a response is due on our application to convert $GBTC to an ETF, we have retained Donald B. Verrilli, Jr., former Solicitor General of the United States, as additional legal counsel. A short on why:
— Grayscale (@Grayscale) June 7, 2022

Meanwhile Citadel Securities, a market maker that could provide liquidity for crypto ETFs such as that proposed by Grayscale on Tuesday said it was open to supporting crypto ETFs but won’t do so without regulators' approval.

“We will be ready if and when those products are approved, but we are taking a measured approach,” said Citadel ETF head Kelly Brennan said in an interview with Bloomberg.

Market makers are key liquidity providers in the ETF ecosystem as they ensure continuous and efficient ETF trading.

Elsewhere in the world, crypto-linked ETFs have been gaining increasing popularity, with total assets invested in crypto ETFs and exchange-traded products (ETP) globally reaching $16.28 billion by the end of Q1 2022, according to data from ETF research firm ETFGI.

In February 2021, Canada debuted its first-ever Bitcoin ETF, the Purpose Bitcoin ETF, becoming one of the first countries in the world to adopt a spot Bitcoin ETF.

On May 12, Australia launched its first spot crypto ETFs, including a Bitcoin ETF from Cosmos Asset Management, plus BTC and Ether (ETH) spot ETFs from 21Shares. Another two crypto-backed ETFs were launched on Monday, June 6.

In May, Grayscale began trading its first European ETF, called Grayscale Future of Finance UCITS ETF, which has listings on the London Stock Exchange, Borsa Italiana as well as Deutsche Börse’s electronic trading platform Xetra.

spot etf