• Regulatory approval of the Grayscale Bitcoin Trust to become an ETF would accelerate investor comfort with the asset class, firm’s new ETF head says
  • Grayscale’s goal is to have GBTC conversion approved at or around same time as greenlighting of other bitcoin ETFs, according to Bloomberg Intelligence analyst

Grayscale Investments has hired the former CEO of Alerian to lead the firm in its push to convert its flagship product into an ETF.

David LaValle enters Grayscale’s newly created global head of ETFs role, the firm announced Wednesday. He had been the CEO of Alerian and S-Network Global Indexes, and also previously worked as the US head of SPDR ETF Capital Markets for State Street Global Advisors. 

An Alerian spokesperson declined to comment on who would replace LaValle as CEO of the firm.

Before State Street, LaValle headed Nasdaq’s Exchange Traded Product Marketplace, leading strategy and business development for Nasdaq’s ETP listing and trading businesses.

“The opportunity for me to leverage all of the experiences I have had in each one of those key pillars of the ETF ecosystem and then marry that with Grayscale’s brand in an asset class that is clearly growing and gaining wider acceptance not only from retail investors but institutions at large, was an opportunity that I simply could not pass up,” LaValle told Blockworks.

Grayscale filed earlier this year to convert its Grayscale Bitcoin Trust (GBTC), the world’s largest bitcoin investment vehicle, to an ETF. The product, which launched in 2013 and is traded publicly on the OTCQX, currently has $25 billion in assets under management. 

Grayscale CEO Michael Sonnenshein said last month during an interview with SiriusXM that the firm began speaking with the SEC about morphing GBTC into an ETF in 2016.

“We are 100% committed to converting Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE) and our other investment products into ETFs,” Sonnenshein wrote in his midyear investor letter last month. “We are eager to see the crypto ecosystem reach a point of maturation to give US regulators and policymakers the requisite comfort to approve digital currency ETFs, though timelines remain uncertain.”

LaValle noted the evolution of ETFs, which has become more widely accepted as a high-quality wrapper to deliver an investment strategy to the broadest range of investors. Though the first ETFs were US equity offerings, the executive explained, the wrapper now houses international equities, commodities and fixed income strategies. Crypto ETFs are a “natural evolution” of the wrapper bringing an asset class to market to be consumed by all investors equally, he added.

“Certainly regulation and the ability to actually create and launch and list and trade an ETF is the largest hurdle that we have, but the beauty of that is the conversation has shifted certainly from if there will be a bitcoin ETF to when will there be a bitcoin ETF?” he said. “…It will certainly act as an accelerant for people to get comfortable with that asset class because it will be traded on an exchange and in a wrapper that people are already comfortable with.”

Grayscale is looking to continue building out its ETF team, job postings show, as the firm is looking to hire ETF sales directors, a product development specialist and a compliance officer, among other roles. 

When could the conversion happen and what is its effect on GBTC?

As about a dozen bitcoin ETFs await approval from the SEC, the Grayscale Bitcoin Trust has been an inefficient option for investors, said James Seyffart, an ETF analyst at Bloomberg Intelligence. 

GBTC trades over the counter at premiums and discounts because shares can’t be created at will like an ETF. The product has traded at a steady discount to NAV since February, reaching as much as 21%, Seyffart explained.

“I think the SEC should at least consider allowing them to convert right around the time [the other ETFs are approved],” he said. “Because if there’s a huge gap — say weeks or months — before GBTC can convert to an ETF…I think we’ll see that discount balloon up even more.”

Though the approval of bitcoin ETFs would mean Grayscale’s “moat” in this space would disappear, the competition will be positive for end investors by driving down costs and improving efficiencies, Seyffart argued.  

But regulatory clarity around ETFs remains murky. While issuers like Global X have most recently added to the pile of bitcoin ETFs to be considered by the SEC, the agency has postponed its decision to approve or deny similar products from other issuers.  

SEC Chairman Gary Gensler said during the Aspen Security Forum on Tuesday said that he looks forward to the SEC’s review of ETFs under the Investment Company Act, or ‘40 Act, noting that the ‘40 Act provides investor protections. 

But like some gold ETFs currently on the market, the GBTC ETF would be structured as a grantor trust, Seyffart explained, which falls outside the ‘40 Act structure. 

“I don’t really know exactly how [Gensler’s] going to feel about converting GBTC,” he said.

“My personal opinion is [the SEC] just needs to accept the way that it is. Look at ETFs in Europe and Canada and they’re all working just fine.”

Having one cryptocurrency — likely bitcoin first — in the ETF structure will allow Grayscale to see what regulators need to allow for others within the asset class to be wrapped in an ETF, LaValle said. 

“I think it’s really kind of a sequential approach and a matter of incremental steps,” he told Blockworks. “That transparency will afford us the opportunity to kind of plot the appropriate course that we think will be both acceptable by the regulators, but also meet the demand of our clients.”

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  • Ben Strack is a Denver-based reporter covering macro economics, financial services and digital asset management. Prior to joining Blockworks, he covered the asset management industry for Fund Intelligence, and was a reporter and editor for various local newspapers on Long Island. He graduated from the University of Maryland with a degree in journalism.