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July 3, 2021, 3:26 p.m. EDT

What it might take to convert the largest bitcoin fund into the U.S.’s first ETF

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By Mark DeCambre

Hello, again! We’ve got crypto on the brain this Thursday. Blame Cathie Wood ‘s ARK Invest and 21Shares, which announced earlier this week that they were throwing their collective name into the ring among about a dozen or so prospects aspiring to get a bitcoin /zigman2/quotes/31322028/realtime BTCUSD -1.28% fund into an ETF wrapper.

All the breathless anticipation for a bitcoin ETF, made us wonder why the Grayscale Bitcoin Trust /zigman2/quotes/203330852/delayed GBTC +1.35% hasn’t had an easier go at it than rivals, who are aiming to launch an exchanged-trade fund that is more accessible to average investors. So, ETF Wrap asked Grayscale Investments CEO Michael Sonnenshein to talk about the process a bit.

We’ll get into what he said and his view on the subject of a bitcoin ETF.

As per usual, send tips, or feedback, and find me on Twitter at  @mdecambre  to tell me what we need to be jumping on.  Sign up here  for ETF Wrap.

The Grayscale ETF

Grayscale, which launched in 2013, is a monolith among funds pegged to crypto and Sonnenshein reiterated that the trust is “100% committed to converting,” and said that the provider remains “in very close dialogue with regulators.”

However, it isn’t clear if Grayscale has submitted a public application or prospectus to complete a conversion, which it can also do confidentially. Sonnenshein wouldn’t say precisely where Grayscale is in the process other than to say “our hat is very much in the ring.”

Sonnenshein gives the impression that the fund’s eight-year record as a fund and its status as a Securities and Exchange Commission reporting entity, which comes with regular reporting requirements, gives it an advantage versus competitors in the race toward an ETF.

“Becoming an SEC reporting company that was an intense process…and something that I think that is, generally speaking, not appreciated enough.”

“That brought the product just one major step closer to becoming an ETF,” he said.  

The SEC has already delayed a decision on ETF provider VanEck’s proposed bitcoin product, citing questions about market manipulation and whether any single market participant would have “the ability to buy or sell large amounts of bitcoin without significant market impact.”

Sonnenshein said that the threat of manipulation is still front and center for the SEC and notes that market infrastructure in the crypto world may also need to improve its systems to allow for better communication and the ability to call out potential acts of manipulation taking place in the market.

“Some of that framework does not exist” he noted. That is not to say that it won’t eventually, to be sure.  

GBTC holds the equivalent of some 654,600 bitcoin and is currently listed on the OTC, or over-the-counter, market.

For its part, Sonnenshein said that there are two other things that Grayscale needs to do get closer to ETF status like shifting from its current OTC home to a larger exchange like the Nasdaq /zigman2/quotes/205547889/lastsale NDAQ -0.35% or the Intercontinental Exchange /zigman2/quotes/209108507/composite ICE -0.73% -owned New York Stock Exchange.

The trust would also need to be able to facilitate the creation and redemption of shares via authorized participants, which is considered an integral element that makes ETFs less expensive, and more transparent and tax efficient than, say, mutual funds.

US : CoinDesk
-355.06 -1.28%
Volume: 0.00
Oct. 2, 2023 8:45p
US : U.S.: OTC
$ 19.45
+0.26 +1.35%
Volume: 2.88M
Oct. 2, 2023 4:00p
US : U.S.: Nasdaq
$ 48.42
-0.17 -0.35%
Volume: 3.12M
Oct. 2, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$23.87 billion
Rev. per Employee
$ 109.22
-0.80 -0.73%
Volume: 2.32M
Oct. 2, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$62.84 billion
Rev. per Employee
1 2
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