Grayscale, the world's largest bitcoin-only investment vehicle, has once again attempted to convince the US Securities and Exchange Commission (SEC) to allow conversion of the Grayscale Bitcoin Trust (GBTC) into a spot exchange-traded fund (ETF).
Many and varied are the applications for a Bitcoin exchange traded fund (ETF), but despite the carefully lodged protests by some of the applicants, including Greyscale, the SEC has always denied a Bitcoin ETF, stating that investors would not be adequately protected.
According to an article in Proactive Investors, a new Grayscale appeal, termed the SEC’s refusal as “arbitrary to its core” and “illogical” given that the SEC hadn’t had a problem in approving futures ETFs. The Grayscale petition stated that the SEC's decision should be held unlawful and set aside.
The main problem with GBTC is that the shares cannot be redeemed, leaving investors with only one option, of selling them on to a willing buyer.
Over time, the shares have underperformed against the underlying bitcoin, and have shown a very large negative discount. However, with Bitcoin rising over recent times, the gap has narrowed somewhat.
Osprey Funds, the controlling shareholder of Grayscale’s parent company Digital Currency Group (DCG) has made a bid to take over as the trust’s sponsor and has made several recommendations.
These include slashing the management fee to 0.49%, and cleaning up the expense structure of the fund which contains significant conflicts of interest, seeking to implement a redemption program as soon as possible, and pursuing a listing on the New York Stock Exchange.
Valkyrie Investments is also interested in taking over as the sponsor of GBTC, and co-founder Steven McClurg was quoted by Proactive Investor as saying:
“We understand that Grayscale has played an important role in the development and growth of the bitcoin ecosystem with the launch of GBTC, and we respect the team and the work that they have done.
“However, in light of recent events involving Grayscale and its family of affiliated companies, it is time for a change. Valkyrie is the best company to manage GBTC to ensure its investors are treated fairly.”
It remains to be seen what actions Grayscale and DCG will take in response to the pressure they are facing, but it is clear that something needs to be done to protect the interests of GBTC investors.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.