Interview: Grayscale Fights SEC To Turn The Largest BTC Trust Into Largest BTC ETF

As the largest digital currency asset manager, Grayscale leads the way in helping investors access digital assets.

Grayscale Bitcoin Trust (GBTC) is an important part of that. At over $14.5 billion, it is the largest Bitcoin trust according to Grayscale, and one of the first securities solely invested in and deriving value from the price of Bitcoin BTC/USD.

Although a Bitcoin fund might lack the independence popular with Web3-native investors, it has provided access to the value of Bitcoin while avoiding the challenges of buying and safekeeping BTC.

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The massive BTC fund is nearly 10 years old, but Grayscale has an eye on turning it into an ETF. The move would force the fund to trade in line with market prices for Bitcoin. That would be a great boon for current GBTC investors, since the fund has consistently traded with a discount since March 2021.

However, the request to convert GBTC into an ETF was denied by the Securities and Exchange Commission (SEC).

On June 29, 2022, Grayscale filed a new petition for review with the U.S. Court of Appeals for the DC Circuit on behalf of Grayscale.

“Grayscale has a long history of constructive engagement with the SEC. The GBTC was launched in 2013 and became publicly traded in 2015 with SEC reporting in 2020," Craig Salm, Chief Legal Officer of Grayscale, told Benzinga.
Over that time, there was an initial effort to convert GBTC into a spot ETF. Ultimately, the Commission was not ready. We're now challenging that decision."

Recently, the U.S. Court of Appeals - D.C. Circuit court scheduled oral arguments for March 7.

When asked to characterize the stakes of the case, Salm responded:

“For our investors, more than $4 billion of value is being kept from them because GBTC has not been able to convert to an ETF. For the broader crypto community, it’s meaningful to further bring Bitcoin into the regulatory perimeter through products like spot Bitcoin ETFs. This would be the largest spot Bitcoin ETF in the world. I think it’s good from a policy perspective, from a regulatory perspective, and from a US competitiveness perspective.”

Grayscale seems to take the position that successfully arguing this case will be a net win for its customers and for the industry.

“It's very important because we’re talking about the world's largest publicly traded Bitcoin Fund, with nearly a million investors across all 50 states. Converting into an ETF would make it an even more protected and efficient vehicle for investors. We believe that the Commission already has the tools necessary to allow that to happen. As we get more regulatory clarity and potentially more legislation in crypto, those will also be additive for the U.S. crypto industry,” Salm said.

Grayscale is the appellate phase of the litigation process and has a timeline for investors posted on the site.

Image by Pete Linforth from Pixabay.