Grayscale, the world’s largest asset management firm, has announced plans to convert its Bitcoin Trust Fund (GBTC) to an Exchange Traded Fund (ETF).
The same transformation could happen with those Grayscale trusts that target other digital assets. Such as Ethereum, Bitcoin Cash and Litecoin. Currently, the volume of investor funds that Grayscale has invested in various cryptocurrencies is about $ 40 billion.
Grayscale applied for a Bitcoin ETF back in 2016. However, the following year, she withdrew her application due to the unfavorable regulatory climate at the time. Therefore, the digital asset manager decided to launch his trust fund to serve institutional investors.
Four years later, Grayscale poised to renew its SEC approval efforts for Bitcoin ETFs. “We are 100% committed to converting GBTC to ETF. The timing will be determined by the regulatory context, “said Grayscale CEO Michael Sonnenshein.
Thus, he confirmed the company’s intention to re-apply to the US Securities and Exchange Commission (SEC).
The company noted that the move from a Bitcoin fund to an ETF is the most logical next step in the evolution of its Bitcoin offering.
Grayscale launched Bitcoin Trust in 2013. Institutional investors send funds to Grayscale and the company uses the money to buy bitcoins. Grayscale then sells the Trust’s shares on the stock market. This means that Bitcoin Trust offers institutional investors access to the flagship cryptocurrency without having to own the asset.
If the company succeeds in converting the GBTC into an ETF, the shareholders holding the GBTC shares will not required to do anything. And the management fee will be drastically reduced.
Attempts to launch Bitcoin ETFs in the US have so far been unsuccessful
US Bitcoin ETF approval remains one of the most elusive targets for the crypto industry. Cause the SEC rejecting dozens of applications in recent years. Some industry observers see ETFs, which provide traditional investors with access to BTC without having to own the asset itself, as a potential game changer.
Despite the fact that attempts to launch ETFs on Bitcoins in the United States have been going on for the past few years, and so far without result, an event occurred in February of this year that could greatly affect the SEC’s opinion on this issue. The fact is that for the first time in history in Canada, a Bitcoin ETF (operator – Purpose Investments) not only allowed and launched, but at the same time it was able to become one of the most popular ETFs among institutional investors in this country.
What is an exchange-traded fund?
An ETF is a type of security that contains underlying investments such as commodities, stocks, or bonds. It often resembles a mutual fund in that it is consolidated and managed by its issuer. ETFs have become a $ 7.7 trillion industry, up 65% in the past two years alone.
An ETF is much more acceptable to mutual fund and pension fund managers as it carries much less risk than a closed-end trust such as the GBTC. Private investors may not have been aware of the possibility that GBTC is trading below net asset value.
To summarize, we can say that the ETF product carries significantly less risk due to the greater transparency and the possibility of share buybacks in the event of a stock trading at a discount. However, the impressive market capitalization of GBTC clearly shows that institutional investors are already in business.