Grayscale met with SEC to discuss spot Bitcoin ETF details

Executives from crypto asset manager Grayscale have met with the Securities and Exchange Commission to discuss details of its flagship Bitcoin (BTC) trust, which the firm wants to convert to a spot Bitcoin exchange-traded fund (ETF).

A Nov. 20 SEC memo disclosed Grayscale CEO Michael Sonnenshein, legal chief Craig Salm, ETF head Dave LaValle and four other executives, along with five Davis Polk law firm representatives, met with the SEC’s division of trading and markets.

The memo said discussions “concerned NYSE Arca, Inc.’s proposed rule change to list and trade shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E.”

Grayscale detailed that it had entered a Transfer Agency and Service Agreement with BNY Mellon, according to a filing shared by Bloomberg ETF analyst James Seyffart.

The bank will act as the agent for its Grayscale Bitcoin Trust (GBTC), facilitating the issuance and redemption of shares and maintaining shareholder accounts.

In a Nov. 21 X (Twitter) post, Seyffart observed the trading and markets division is in charge of approving or denying 19b-4s — a form used to inform the SEC of a proposed rule change by a self-regulatory organization.

Seyffart added Grayscale’s agreement with BNY Mellon was “likely something that was always going to be required at some point” and isn’t an indicator that the GBTC will soon be converted.

Since it feels like everyone is asking. Events of the last few days haven’t changed my & @EricBalchunas’ odds. We can’t go any higher than 90% by Jan 10th. That said, things are continuing to move forward in our view.

— James Seyffart (@JSeyff) November 21, 2023

In a Nov. 22 X post, ETF Store President Nate Geraci opined the “most substantive aspect of Grayscale’s SEC meeting yesterday is that GBTC ‘conversion’ is being referred to as an ‘uplisting.’”

“That doesn’t indicate any issues with conversion to ETF,” he said.

Grayscale has a real shot of dominating this ETF category if it can “uplist GBTC to NYSE Arca on the same day other issuers launch spot BTC ETFs,” and they make a concerted effort to compete on fees, Geraci added.

IMO, most substantive aspect of Grayscale’s SEC meeting yesterday (& today’s subsequent 8k filing) is that GBTC “conversion” is being referred to as an “uplisting”…

That doesn’t indicate any issues w/ conversion to ETF (contrary to the below). https://t.co/yAMBOsRlUs pic.twitter.com/nCZ8Z1ndNO

— Nate Geraci (@NateGeraci) November 22, 2023

Geraci said Grayscale will enter the markets on day one with $20 billion in assets under management, even with BlackRock in the mix.

Related: US court issues mandate for Grayscale ruling, paving way for SEC to review spot Bitcoin ETF

Grayscale submitted an S-3 form registration statement with the SEC on Oct. 19, which showed its intention to list the shares of GBTC on the NYSE Arca under the ticker symbol GBTC.

In October, a U.S. appellate court issued a mandate for the SEC to review its decision to deny Grayscale’s bid to convert the GBTC to a spot ETF.

The firm is among other major asset managers, including BlackRock and Fidelity, seeking SEC approval for spot Bitcoin ETFs.

Seyffart maintained that “things are continuing to move forward” and his odds of approval — a 90% likelihood that an ETF is approved on or before Jan. 10, 2024 — remained the same.

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