Grayscale Completes S-3 Amendments
The well-known crypto asset management Grayscale has completed the filing of an amended S-3 with the US securities regulator ahead of the December 29 deadline. Curiously, the news of Barry Silbert’s departure from Grayscale’s board of directors was announced at the same time as this filing completion.
Furthermore, the crypto community is rife with speculation as to what Silbert’s resignation could mean. The increased likelihood of Grayscale’s effort to transform its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF remains a hot debate.
The digital asset community now awaits the US Securities and Exchange Commission (SEC) ‘s decision regarding Grayscale’s proposal. Nevertheless, some regard Silbert’s departure from the board as a major turning point that would help Grayscale’s case for Bitcoin ETF approval.
Speculations Over Silbert’s Resignation
According to Lumida Wealth CEO Ramah Luwalia, Silbert may have resigned strategically to increase the likelihood of an ETF approval by the US regulator. Part of the reason for this belief is that Silbert and Digital Currency Group (DCG) are currently the subject of an investigation by the SEC.
Adam Cochran, a partner at Cinneamhain Ventures, opined that Grayscale and the SEC probably orchestrated Silbert’s exit. Cochran added that the US SEC, Grayscale and Silbert may have reached this agreement as one of the final conditions for this proposal approval.
In an 8-K filing to the SEC on December 26, Grayscale formally identified Mark Shifke as the replacement for Silbert as chairman of the board; Silbert’s departure was noted in the filing.
In addition to Silbert’s departure, a senior Bloomberg ETF analyst, Eric Balchunas, noticed an interesting change in the updated S-3 filing. The change was Grayscale’s adoption of a cash redemption model, which the regulator had earlier requested.
There has been much discussion in the industry about Grayscale’s future and its pursuit of the highly sought-after ETF approval since the company made a significant change in its operational approach.
The Cash Vs. In-Kind Redemption Debates
The suitable redemption model for investors in ETFs has been an ongoing dispute between asset managers and the SEC. It has been a crucial source of disagreement for those managers’ aspirations to launch a spot Bitcoin ETF.
Traditional ETFs that track equities or commodities often use an in-kind mechanism, letting approved participants manage the fund’s assets directly. But under a cash-model mechanism, the only way to buy or sell spot Bitcoin ETF shares would be with cash.
To better monitor the flow of Bitcoin from exchanges, the SEC has prohibited broker-dealers from having any kind of direct connection with the cryptocurrency. The goal of this step is to reduce the dangers that can arise from non-compliance with KYC and anti-money laundering regulations.
The supposed focus on investor protection by the SEC was a point of contention for VB Capital’s general partner, Scott Johnsson. He stressed that the number of prospective buyers of Bitcoin via a spot exchange-traded fund (ETF) could be affected by the SEC’s preferred redemption model. Meanwhile, other spot commodities ETFs function on in-kind models.
