Michael Sonnenshein, CEO, Grayscale Investments on the NYSE, April 18, 2022.
Grayscale, the asset supervisor working the world’s largest bitcoin fund, met privately with the Securities and Exchange Commission final week in an effort to influence the regulator to approve the conversion of its flagship fund into an ETF, CNBC has realized.
Turning the Grayscale Bitcoin Trust into a NYSE-traded ETF would broaden entry to bitcoin and improve protections whereas unlocking as much as $8 billion in worth for investors, based on a 24-page presentation obtained by CNBC.
That’s as a result of the belief, identified by its GBTC ticker, has traded at a median 25% low cost to the value of its underlying asset since early 2021, a reduction that ought to disappear upon conversion, the corporate mentioned.
Led by CEO Michael Sonnenshein, Grayscale has engaged in a high-stakes marketing campaign to strain the U.S. regulator to approve the primary spot-based bitcoin ETF. The asset supervisor has watched as competitors together with ProShares win approval for futures-based bitcoin exchange-traded funds, exhibiting that the SEC is extra snug with merchandise based mostly on futures over these based mostly on bitcoin.
A spot-based bitcoin ETF can be a big milestone within the adoption of digital belongings as a result of it might open them as much as unusual investors in a well-recognized wrapper that trades like a inventory. The objective has eluded the trade for greater than 5 years. Grayscale’s first software for a spot bitcoin ETF was in early 2017.
GBTC holds roughly 3.4% of the world’s bitcoin and is owned by greater than 850,000 U.S. accounts, based on Grayscale. The fund, which enabled institutional investors like Ark Invest’s Cathie Wood to wager on bitcoin, ballooned to greater than $30 billion in measurement earlier than the current crypto retrenchment introduced its belongings to $20.1 billion.
The funding agency has helped coordinate a public letter-writing push, flooding the SEC with greater than 3,000 letters in assist of its software. The agency even hinted that it might sue the SEC if its software was denied.
The deadline for the SEC to approve or reject Grayscale’s software is July 6.
Most analysts aren’t bullish on SEC approval after a half-dozen comparable purposes from rivals have been denied since November. The SEC is worried with the potential for fraud and manipulation in bitcoin markets and has indicated it will not approve a spot-based software till world exchanges are higher regulated.
That might clarify Grayscale’s method, which appeared to alternate between flattering the company (“The SEC is uniquely positioned to assist the White House Executive Order to make sure America leads in digital asset innovation,” based on one slide) and criticizing it:
“The SEC is discriminating in opposition to issuers by approving bitcoin futures ETFs and denying bitcoin spot ETFs,” based on Grayscale.
Grayscale argued that a spot bitcoin ETF is “no riskier” than futures-based ETFs, as a result of the 2 markets are each affected by the underlying worth of bitcoin and observe one another carefully.
The agency additionally took pains to stipulate its rising disclosures tied to GBTC and its community of companions, together with BNY Mellon and Coinbase, who’re prepared to assist its conversion course of.
The SEC did not instantly return a request for remark.