Representatives from Grayscale, the crypto asset management firm, recently engaged in discussions with the Securities and Exchange Commission (SEC) regarding the potential conversion of its flagship Bitcoin trust into a Bitcoin exchange-traded fund (ETF).
According to an SEC memo dated November 20, Grayscale CEO Michael Sonnenshein, legal chief Craig Salm, ETF head Dave LaValle, and four other executives, along with five representatives from the Davis Polk law firm, met with the SEC’s division of trading and markets.
The discussions centered around NYSE Arca, Inc.’s proposed rule change related to listing and trading shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E.
Grayscale disclosed that it had entered into a Transfer Agency and Service Agreement with BNY Mellon, as revealed in a filing by Bloomberg ETF analyst James Seyffart. BNY Mellon will serve as the agent for Grayscale’s Bitcoin Trust (GBTC), facilitating share issuance and redemption, as well as maintaining shareholder accounts.
In a tweet on November 21, Seyffart noted that the trading and markets division is responsible for approving or denying 19b-4s, the form used to inform the SEC of a proposed rule change by a self-regulatory organization.
He emphasized that the agreement between Grayscale and BNY Mellon was likely a necessary step and did not necessarily signal an imminent conversion of GBTC to an ETF.
A subsequent tweet on November 22 from Nate Geraci, the President of ETF Store, highlighted that the significant aspect of Grayscale’s SEC meeting was the reference to GBTC conversion as an “uplisting.”
Geraci expressed that this terminology doesn’t imply any issues with the conversion process to an ETF. He suggested that Grayscale could dominate the ETF category by “uplisting” GBTC to NYSE Arca simultaneously with other issuers launching spot BTC ETFs, provided they compete effectively on fees.
Geraci anticipated that Grayscale, with $20 billion in assets under management, could enter the market on day one, even in competition with major players like BlackRock. Grayscale submitted an S-3 form registration statement to the SEC on October 19, indicating its intention to list GBTC shares on NYSE Arca under the ticker symbol GBTC.
The update mentioned an appellate court mandate in October directing the SEC to review its decision denying Grayscale’s bid to convert GBTC into a spot ETF. Grayscale, along with other prominent asset managers such as BlackRock and Fidelity, is seeking SEC approval for spot Bitcoin ETFs.
Seyffart expressed confidence that the process is advancing, maintaining a 90% likelihood of ETF approval on or before January 10, 2024.