Grayscale, a prominent crypto asset manager, recently made an important regulatory move by submitting an amended S-3 filing to the United States Securities and Exchange Commission (SEC).
This development coincided with the announcement of Barry Silbert’s resignation as the CEO of its parent company, Digital Currency Group (DCG), from Grayscale’s board of directors.
The timing of Silbert’s departure has raised speculation within the crypto market regarding its potential impact on Grayscale’s efforts to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin Exchange-Traded Fund (ETF), a decision currently pending with the SEC.
Ramah Luwalia, CEO of Lumida Wealth, suggests that Silbert’s resignation may have been a strategic move to enhance the likelihood of the ETF’s approval.
This theory is partly rooted in the SEC’s ongoing investigation into Silbert and DCG.
Additionally, Adam Cochran, a partner at crypto venture capital firm Cinneamhain Ventures, posits that Silbert’s departure was likely a prearranged agreement between Grayscale and the SEC in anticipation of the conversion request gaining approval.
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The official announcement of Silbert’s resignation was made in an 8-K filing to the SEC on December 26. Grayscale also revealed that Mark Shifke, DCG’s chief financial officer, would succeed Silbert as chairman of the board at Grayscale.
Aside from Silbert’s departure, the most noteworthy aspect of the amended S-3 filing was Grayscale’s shift toward a cash creation model, marking a departure from its previous in-kind model.
This change is significant as it addresses an ongoing point of contention between asset managers seeking to launch a spot Bitcoin ETF and the SEC.
In an in-kind model, fund market participants can directly handle the assets within the fund, while a cash-creation model allows new shares in a spot Bitcoin ETF to be created or redeemed exclusively through cash transactions.
The SEC’s move to restrict broker-dealers from directly dealing with Bitcoin aims to enhance monitoring and reduce potential risks related to anti-money laundering and Know Your Customer compliance.
Scott Johnsson, general partner at VB Capital, expressed concern that the cash creation model could introduce greater risks for investors seeking exposure to Bitcoin through a spot ETF.
This novel approach contrasts with other spot commodity ETFs that operate on an in-kind basis, raising questions about its viability in the regulatory landscape.
While Grayscale’s strategic moves are generating intrigue, the crypto community will closely monitor the SEC’s response and the potential implications for the broader market.
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