On Wednesday, digital asset manager Grayscale submitted an updated prospectus to the Securities and Exchange Commission (SEC) for converting its Grayscale Bitcoin Trust into a spot bitcoin exchange-traded fund (ETF). This follows a meeting between Grayscale and the SEC to discuss the proposed product. The updated filing is an amended Form S-3 registration statement, used by companies that have already fulfilled SEC reporting obligations.
Updates to the Prospectus
According to ETF analyst James Seyffart at Bloomberg, the prospectus does not appear to include significant changes from the original filing. One important update is a suggested ticker symbol change to “BTC” instead of the current “GBTC.” Seyffart later clarified Grayscale has no plans to use BTC ticker in this case, as the company has a separate filing for Global Composite Bitcoin ETF registered with the BTC ticker. Seyffart tweeted that the filing confirms Grayscale is continuing its talks with the SEC and is making updates based on feedback. Specific changes include shortening a line about cash creation orders and removing some risk disclosure pages.
A November 20 memo revealed members of the SEC’s Division of Trading and Markets met with Grayscale executives and lawyers from Davis Polk to discuss the proposed listing on NYSE Arca. Grayscale CEO Michael Sonnenshein was also present.
The Potential for Approval
Grayscale is seeking to convert an existing Bitcoin investment product into an ETF, unlike other spot Bitcoin ETF applications. While the SEC is not required to approve the prospectus, analysts view continued talks between regulators and Grayscale as a positive sign for bitcoin ETF prospects in general. Earlier in August, Grayscale won a court ruling requiring the SEC to reconsider its initial rejection of the conversion application. This put pressure on the agency to take another look at the proposal.
ETF Store President Nate Geraci commented that referring to the GBTC conversion as an “uplisting” shows Grayscale’s confidence in securing approval. If converted on the same day other issuers launch spot bitcoin ETFs, Grayscale could dominate the space by leveraging its $50 billion in assets under management. Bloomberg analysts recently boosted the probability of a spot bitcoin ETF being approved by January 2023 to 90%. With Grayscale actively courting regulator feedback and amending its proposal, the long-awaited product appears increasingly likely to become a reality.
The SEC has yet to approve a spot bitcoin ETF in the U.S., rejecting all applications thus far. But Grayscale’s persistence and existing scale may prove decisive in finally overcoming this barrier. With cryptocurrencies firmly entrenched in mainstream finance, regulators seem to be running out of reasons to deny investors access to a spot Bitcoin ETF.
