Grayscale, a major crypto asset manager, recently made headlines with an S-3 filing amendment to the U.S. securities regulator, coinciding with CEO Barry Silbert’s resignation from Grayscale’s board of directors within its parent company, Digital Currency Group (DCG).
This development has stirred significant speculation within the crypto market about the fate of Grayscale’s long-pending Grayscale Bitcoin Trust (GBTC) conversion into a spot Bitcoin ETF, currently under consideration by the Securities and Exchange Commission (SEC).
Insiders and market commentators have been quick to draw connections between Silbert’s departure and the ETF’s potential approval.
Lumida Wealth’s CEO Ramah Luwalia suggested Silbert’s resignation might serve to improve the chances of the ETF approval, particularly in light of the SEC’s ongoing scrutiny of Silbert and DCG.
Adam Cochran, a partner at Cinneamhain Ventures, echoed this sentiment, suggesting Silbert’s departure might have been a prearranged maneuver between Grayscale and the SEC, potentially linked to the upcoming conversion request approval, according to Cointelegraph.
Silbert’s exit, documented in an 8-K filing with the SEC, led to the appointment of Mark Shifke, DCG’s chief financial officer, as the new chairman of Grayscale’s board.
However, beyond Silbert’s resignation, the amended S-3 filing drew attention for a significant change: Grayscale’s move to embrace a cash creation model, marking a divergence from its previous in-kind model.
Moreover, Eric Balchunas, a senior Bloomberg ETF analyst, noted this as Grayscale’s yielding to a cash creation model. The in-kind model, typical in most stock and commodity-based ETFs, allows market participants to handle assets directly in the fund. Conversely, the cash-creation model would limit the creation or redemption of new shares in a spot Bitcoin ETF strictly through cash transactions.
The SEC’s reluctance to permit broker-dealers from directly dealing with Bitcoin stems from a desire to better monitor Bitcoin movements from exchanges, ensuring compliance with anti-money laundering and Know Your Customer protocols.
Scott Johnsson, general partner at VB Capital, voiced concerns about the SEC’s stance. While the SEC purportedly aims to protect investors, the adoption of a cash-creation model for the Bitcoin ETF could present heightened risks, particularly compared to the more traditional in-kind model prevalent in spot commodity ETFs.
As the discussion unfolds, industry observers and stakeholders remain attentive, awaiting further developments in the evolving narrative surrounding Grayscale’s strategic maneuvers and their implications for the much-anticipated Bitcoin ETF approval.
