It is being investigated further by the Securities and Exchange Commission (SEC) in connection with Grayscale's proposal to convert its Grayscale Bitcoin Fund (GBTC) into a spot bitcoin exchange-traded fund (ETF).
The Securities and Exchange Commission (SEC) published a notice on November 2 inviting comments on the proposed rule change filed by NYSE Arca.
After filing a 19b-4 to list the converted GBTC ETF on October 19, the SEC began the process of determining whether or not the product should be approved for listing. The Securities and Exchange Commission (SEC) might make a decision as early as December 24. The government, on the other hand, has a track record of granting extensions for bitcoin spot product applications.
The SEC has issued a fresh notice in which it is seeking feedback on the idea. This has been the strategy used by the agency in the past, most notably in the case of VanEck's application. The Commission has continued to pursue VanEck, most recently issuing a notice in June of this year asking public comment on the matter. A final judgment must be made by November 14th on whether or not to accept VanEck's submission as the most advanced in this round of applications.
In February of this year, Grayscale announced its intention to convert its flagship fund, GBTC. Grayscale has had intentions to convert its flagship fund for some time now. In addition, the company has stated that it wants to convert all of its goods over time.
Since then, it has appointed David LaValle as global head of ETFs, a position previously held by the former CEO of index provider Alerian and the former head of ETF capital markets at State Street. It has also outsourced some fund administration work for GBTC to BNY Mellon in anticipation of the planned conversion.
Grayscale Bitcoin Trust, possibly the founding father of cryptocurrency funds, achieved a long-held dream by becoming an exchange-traded fund — at least in the name — in December 2017.
Since at least Monday, FactSet System Inc. FDS, -2.06 percent has listed the Bitcoin Trust GBTC, +0.06 percent of crypto-focused asset manager Grayscale Investment as a Grayscale Bitcoin Trust ETF on its platform, which is used by professional investors and other Wall Street clients, including Dow Jones, the publisher of MarketWatch.
However, the Grayscale fund, which is the largest bitcoin investment vehicle on the planet, with a market capitalization of over $27 billion as of Tuesday's close, is not an exchange-traded fund (ETF). ETFs are traded in the same way that stocks are, and their price is transparent.
According to a FactSet spokesperson, the typo in the name of GBTC, which refers to the bitcoin trust's ticker symbol, has been corrected. It's not apparent what caused the mishap to happen.
The company, according to a Grayscale spokeswoman, declined to comment on the naming problem explicitly, but stated that the company "has failed to convert GBTC into a Bitcoin Spot ETF, and the application is now under review until July 2022.
It has been publicly listed since 2013 because it is a subsidiary of Digital Currency Group and is a pioneer in digital asset management. Its Grayscale Bitcoin Trust is a closed-end fund that has been in operation since 2013. At one point, it was one of the only legitimate avenues for traditional investors to obtain exposure to bitcoin, the world's most valuable digital asset by market capitalization.
Bitcoin, a decentralized digital currency created by a person or group of people known as Satoshi Nakamoto in 2009, and its crypto-brethren, such as ETHUSD, +0.14% on the day despite its tremendous volatility, some Wall Street investors are beginning to see the Ethereum blockchain as a legitimate asset class.
To become an ETF, Grayscale filed a formal application with the Securities and Exchange Commission on October 19. BITO, +0.17% was launched at the same time as the ProShares Bitcoin Strategy ETF BITO, +0.17%, the first bitcoin-pegged ETF to debut on US markets, submitted its application Valkyrie Bitcoin Strategy ETF BTF and VanEck Bitcoin Strategy ETF XBTF have been added to the list of bitcoin-related ETFs since then.
Grayscale's ETF objectives have an obvious rationale. Maintaining its position as a leading asset manager is a priority for it. Transforming into an ETF would allow the fund to fulfill its goal of increasing assets under management while also passing muster with the SEC.
In the short term, however, the regulatory hurdles are quite significant.
In contrast to Grayscale's desire for an ETF with direct ownership of bitcoin, SEC Chairman Gary Gensler has signaled a reluctance to support futures-linked bitcoin products because he believes they provide stronger consumer protections for investors.
Critics of a bitcoin futures ETF point out that the costs of rolling the fund into new monthly futures contracts that underpin the fund and the issues associated with paying more because futures contracts for crypto can be valued more richly for delivery in future months than they are for physical bitcoin.
Grayscale, on the other hand, isn't giving up on its goals. A Bitcoin ETF, similar to the SPDR Gold Shares GLD, -1.54 percent fund, is being developed to track the price of the precious metal through physical gold rather than futures contracts.
There is "no foundation for [the SEC's] argument that investing in the derivatives market for an asset is appropriate for investors, while investing in an asset itself is not," Grayscale wrote in a letter late last month.
To put it another way, the mislabeling of Grayscale's top bitcoin fund on FactSet's platform raised some suspicions among market participants.
The fact that GBTC is so widely followed and held by investors makes this an intriguing story, according to CFRA's head of mutual funds and ETF research Todd Rosenbluth, who spoke to MarketWatch.