Grayscale Files to Convert its Bitcoin Trust into an ETF

Grayscale Investments has filed to convert its flagship product into a bitcoin spot exchange-traded fund (ETF) as a continuation of a process that the firm began back in 2017, Craig Salm, vice president of legal at Grayscale Investments, told Blockworks on Tuesday. 

On behalf of Grayscale, the New York Stock Exchange Arca filed with the US Securities and Exchange Commission to convert the Grayscale Bitcoin Trust (GBTC) into an ETF. The news comes at a time when the SEC has cleared the first ever US-based Bitcoin Futures ETF, paving the way for mainstream adoption of cryptocurrencies.

Earlier on Tuesday, ProShares’ Bitcoin Futures-based ETF (BITO) began trading, making it the first bitcoin-linked ETF in the US, Blockworks previously reported. 

Salm said after Grayscale first filed for a bitcoin ETF in 2017, it was clear that the SEC had concerns with the underlying Bitcoin markets due to potential fraud and manipulation. But, over the years the company has had an open dialogue with the SEC.

Grayscale Investments CEO Michael Sonnenshein said in early October that he expects all of the fund group’s products to one day become ETFs if regulation allows for the conversions, Blockworks reported.

“Earlier this year, the new chair of the commission expressed that he would be open to reviewing bitcoin ETF applications,” Salm said. “So what that resulted in, was a lot of new filings for that first type of application… and at Grayscale we’ve been committed to converting GBTC to an ETF when the regulatory environment would permit it,” he said. 

Grayscale Investments is the world’s largest digital currency asset manager with over $53 billion in AUM as of October 18, 2021. The company launched its Grayscale Bitcoin Trust in 2013 and the trust holds about 3.44% of all Bitcoin in circulation, according to the company. The GBTC has about $40 billion in assets under management from investors and institutions across all 50 US states. 

“It’s our belief today that if the commission is open to a futures-based ETF, then the commission should also be OK with the physical or spot-based ETFs,” Salm said. 

Salm said he believes the shift in the commission’s narrative was due to developments in the bitcoin market, a lot of new maturity and more volume taking place. “They’re mainly focused on whether those other marketplaces, where the trading happens, have the same types of investor protections that we’ve come to know here in the US,” he added. 

This approval further validates that this digital asset class is here to stay, Salm said. In addition, there has been greater demand from institutions that want to get involved, he added. 

In the future, Grayscale hopes to continue expanding its product offering to make digital assets more accessible to both institutional and retail investors, Salm said.