Grayscale Strategic Shift: Silbert’s Resignation and the Path to a Bitcoin Spot ETF
Crypto News – Grayscale, a prominent crypto asset management firm, has recently amended its S-3 filing with the United States Securities and Exchange Commission (SEC). This move coincided with a significant announcement: Barry Silbert, CEO of Digital Currency Group, Grayscale’s parent company, has stepped down from his role on Grayscale’s board of directors.
The crypto community is abuzz with speculation that Silbert’s departure might substantially boost Grayscale’s chances of transforming its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin Exchange-Traded Fund (ETF). This transformation is currently pending approval from the SEC.
Barry's resignation was @Sonnenshein's X-Mas gift.
— Ram Ahluwalia CFA, Lumida (@ramahluwalia) December 26, 2023
What to make of @bsilbert resigning from Grayscale?
Grayscale has had 9 meetings with the SEC per the table below (h/t @JSeyff)
Today, there are only allegations against DCG which have not been resolved in a court of law.… https://t.co/d7tZFFAOoU pic.twitter.com/NjjdWq0F3a
Ramah Luwalia, CEO of Lumida Wealth, suggests that Silbert’s resignation might have been a strategic decision to favor the ETF’s approval. This speculation stems mainly from the SEC’s ongoing investigation into both Silbert and the Digital Currency Group.
Adding to the discourse, Adam Cochran, a partner at Cinneamhain Ventures, a crypto venture capital firm, posits that Silbert’s resignation was likely a prearranged move between Grayscale and the SEC, potentially smoothing the path for the approval of the ETF conversion request.
The official documentation of Silbert’s resignation was detailed in an 8-K filing to the SEC on December 26. In the wake of his departure, Grayscale announced that Mark Shifke, the CFO of DCG, would take over as the chairman of Grayscale’s board.
In addition to Silbert’s resignation, a critical aspect of Grayscale’s amended S-3 filing is its adoption of a cash creation model. This shift was highlighted by Eric Balchunas, a senior ETF analyst at Bloomberg. The debate between cash versus in-kind creations has been a longstanding point of contention in the quest to launch a spot Bitcoin ETF, with the SEC at the heart of this debate.
Grayscale finally surrendering to cash-only creations, was a big holdout. Pretty sure they have an AP agreement (a crucial last step) so that would check all the boxes. That said, still a mystery whether they will be allowed to go on day one of the Cointucky Derby https://t.co/Wm7TfD3zkP
— Eric Balchunas (@EricBalchunas) December 26, 2023
While the majority of stock and commodity-based ETFs operate on an in-kind model, which allows direct handling of the asset by fund market participants, the cash creation model mandates that new shares in a spot Bitcoin ETF be created or redeemed solely through cash transactions.
The SEC’s strategy to restrict broker-dealers from direct dealings with Bitcoin is seen as an effort to more effectively monitor Bitcoin movements from exchanges, thereby mitigating risks related to anti-money laundering and Know Your Customer compliance.
Scott Johnsson, a general partner at VB Capital, observed that despite the SEC’s stance on investor protection, the move to a cash creation model could introduce higher risks for investors seeking Bitcoin exposure through a spot ETF.
Johnsson notes, “While all other spot commodity ETFs operate using in-kind models, this novel cash-based approach raises questions about its effectiveness and potential impact on investors.”
This development in the crypto space is particularly significant, marking a potential shift in how Bitcoin and similar assets are managed and regulated.
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