Grayscale is not afraid of bitcoin ETF rivals — but should it be?

The firm’s legal chief touts GBTC as “an actual fund today” in an interview with Bloomberg — calling other bitcoin ETF proposals “an idea on paper”


Gorodenkoff/Shutterstock modified by Blockworks


Grayscale Investments’ legal chief said the firm is ready to compete with the long line of prospective bitcoin ETF issuers as it seeks to convert its bitcoin trust (GBTC) to an ETF as soon as possible. 

But one ETF research director notes that Grayscale could lose assets to some of the largest names in the fund world as a bitcoin fund fee war likely looms.  

Grayscale’s court win against the US Securities and Exchange Commission is a victory for the bitcoin ecosystem more broadly, Grayscale chief legal officer Craig Salm acknowledged in a Thursday interview with Bloomberg. 

A Grayscale bitcoin ETF, if approved, would stand out from others, he argued — even as financial giants like BlackRock and Fidelity look to launch similar offerings. 

GBTC launched in 2013 and has $16.9 billion in assets under management. Its shares have recently traded at a steep discount to its underlying bitcoin — a problem solved if it converts to an ETF, Salm said.  

​​”We’re the only ones with an actual fund today with AUM, trading volume and investors,” the Grayscale legal chief added in the interview. “The others are an idea on paper, but we’re definitely looking forward to seeing them compete in the market as well.” 

In addition to BlackRock and Fidelity, other applicants include Bitwise, Invesco, WisdomTree, VanEck, Valkyrie, Global X, 21Shares and Ark Invest — the latter two of which have filed together for a single product. 

The SEC is still considering all the proposals, a process that can last up to 240 days from when each proposal was published into the federal register. That puts the various final deadlines for the regulator to rule on them between January and April, depending on the application.  

“In terms of others getting involved in the space, that’s extremely validating,” Salm said. “We’re always ready for a world with multiple spot bitcoin ETFs. We think investors should have a choice here.”

Fee competition from financial giants awaits

Despite Salm’s confidence that a converted GBTC would be differentiated from other proposed would-be bitcoin ETFs, investors might not stick with Grayscale, according to Neena Mishra, director of ETF research at Zacks Investment Research.

GBTC currently charges a 2% annual fee. The firm has said it would lower GBTC’s fees in the case of an ETF conversion, but has not specified by how much. 

A Grayscale spokesperson did not immediately comment on Friday.  

But Grayscale would have to bring down its expense ratio on a converted GBTC “significantly,” Mishra said, noting that BlackRock and Fidelity are among the lowest-cost ETF providers.

Read more: As potential crypto ETF ‘fee war’ looms, what will spot bitcoin ETFs cost?

If the SEC ends up allowing spot bitcoin ETFs to launch at the same time, brand and expense ratio will be important differentiators, she added — as would marketing efforts after launch.

Dave Nadig, a financial futurist at VettaFi, previously told Blockworks that fund volumes — likely driven by institutions — would also be key to initial bitcoin ETF success if the SEC allows multiple to launch at once.  

“I don’t really think GBTC will attract new money from ETF investors just due to its history,” Mishra said. “In fact, if GBTC’s fee remains high after conversion compared to competing products, some investors might shift from GBTC to other ETFs. Advisers and ETF investors are more comfortable with a BlackRock or Fidelity product than with GBTC.”

Could GBTC conversion lag other bitcoin ETF launches?

Salm’s comments came after a three-judge panel in the DC Circuit Court of Appeals ruled on Tuesday that the regulator denying GBTC’s conversion to an ETF was “arbitrary and capricious” in the wake of its approval of bitcoin futures ETFs.

Read more: What Grayscale’s win against the SEC actually means

The SEC, which has 45 days to appeal, said Tuesday it was “reviewing the court’s decision to determine next steps.”

The court ruling does not automatically allow GBTC to convert to an ETF, but rather informs the SEC that it can’t deny the conversion on the grounds it previously used.  

The DC Circuit Court of Appeals’ decision “greatly limits options for the SEC on the matter of Grayscale’s request,” Mark Connors, head of research at crypto investment firm 3iQ, said in a Wednesday X post. But, he noted, the next steps remain up in the air.

“The court did not distinguish the cleaner path to an ETF that Fidelity, Blackrock and others are seeking from a standing start, relative to Grayscale’s more circuitous, and potentially murkier route,” Connors added.

Mishra told Blockworks it’s possible the SEC will approve one of the new filings by a traditional ETF provider before giving the green light to GBTC’s conversion. 

“While no one knows what the SEC will decide, they should approve all on the same day if they want to appear fair,” she said.

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