David LaValle, Global Head of ETFs for Grayscale Investments, joined Keith Black, Managing Director of RIA Channel, to discuss the potential conversion of Grayscale Bitcoin Trust (OTCQX: GBTC) to a spot bitcoin ETF.
Grayscale, the world’s largest crypto asset manager, has managed GBTC for a decade. As of September 29, 2023, the investment vehicle holds 3.34 percent of bitcoin in circulation and has nearly one million investors. In October 2021, the SEC approved the first bitcoin futures-based ETF. Grayscale then filed to convert GBTC to an ETF that same day, but the SEC ultimately denied the application in June 2022. Grayscale challenged the SEC’s decision on the basis that the bitcoin futures and spot markets are inextricably tied, so it didn’t make sense to have approved a bitcoin futures-based ETF while denying spot-based ETFs.
The D.C. Circuit unanimously agreed with Grayscale’s common-sense argument regarding the similarities of the bitcoin futures and spot markets. The SEC has 45 days from the court’s ruling (October 13) to seek a rehearing. After that, the court has seven days to issue its mandate back for the SEC to reconsider Grayscale’s pending application. Grayscale is operationally ready to operate GBTC as an ETF. The remaining regulatory steps are to (1) uplist GBTC from OTC markets (its current trading venue) to NYSE Arca, (2) obtain regulation M relief to allow for simultaneous creation and redemption, a hallmark of the ETF product wrapper, and (3) register shares of GBTC under the Securities Act of 1933. Once these regulatory steps are accomplished, Grayscale anticipates that GBTC will be able to quickly commence trading as an ETF.
The ETF structure democratizes investment exposures, allowing retail investors access to markets that were previously inaccessible. Spot bitcoin ETFs will allow financial advisors and RIAs to leverage the ETF as building blocks for portfolios offering bitcoin exposure to their clients.
The generic term “ETF” is used to refer to exchange-traded investment vehicles, including those that are required to register under the Investment Company Act of 1940, as amended (the “‘40 Act”), as well as other exchange-traded products which are not subject to the registration requirements of the ‘40 Act.
Investing involves risk, including loss of principal. Investments in digital assets are speculative investments that involve high degrees of risk, including a partial or total loss of invested funds. Investments in digital assets are not suitable for any investor that cannot afford loss of the entire investment.
This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any investment in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change. This content does not constitute an offer to sell or the solicitation of an offer to sell or buy any security in any jurisdiction where such an offer or solicitation would be illegal. There is not enough information contained in this content to make an investment decision and any information contained herein should not be used as a basis for this purpose. This content does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of investors.
WEBCAST – Cryptocurrency Mining & Staking for Financial Professionals
Brooke Stoddard, VP of Investor Solutions, and Matt Maximo, a member of the research team at Grayscale Investments will discuss cryptocurrency mining and staking.
Here’s what attendees will get:
- As the cryptocurrency asset class evolves, how should financial advisors think about cryptocurrency mining and staking?
- In this webinar, Grayscale will walk through the economics of mining and how investors can think about staking.
- After joining, financial advisors will better understand how mining and staking can potentially create new opportunities for investors.
Accepted for 1 CFP® / IWI / CFA CE Credit