Grayscale forms new confidence to pursue spot Bitcoin ETF in US

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(Kitco News) – Grayscale Investments, the world’s largest digital currency asset manager, remains dedicated to launching a spot Bitcoin (BTC) exchange-traded fund (ETF) in the US and has chosen to take a different approach than simply submitting an application with Securities and Exchange Commission (SEC) with the formation of Grayscale Funds Trust.

The asset manager announced the trust on Tuesday, registering the new arm as a statutory trust structure in Delaware that will allow Grayscale to “independently manage its 1940 Act products while the firm continues to build out its ETF franchise.”

“Today’s filing demonstrates our continued commitment to providing investors with innovative ways to access the digital economy and transformative technologies using a familiar, trusted, regulated investment vehicle: the ETF,” said David LaValle, head of ETFs at Grayscale Global.

To coincide with the creation of the Grayscale Funds Trust, the firm also filed a registration statement on Form N-1A with the Securities and Exchange Commission (SEC) for the Grayscale Ethereum Futures ETF, the Grayscale Global Bitcoin Composite ETF and the Grayscale Privacy ETF, each a series of Grayscale Funds Trust.

According to the registration statement, the fund will not invest directly in digital assets, but may offer “indirect exposure to digital assets by virtue of its investments in companies and exchange-traded vehicles that use one or more digital assets as part of their business or that hold digital assets that investments.”

Grayscale added that the fund will not invest in initial coin offerings (ICOs) and highlighted that “because the fund will not invest directly in any digital assets, it may not track price movements of any digital assets.”

The fund will strive to invest at least 80% of its net assets “in the securities that make up the index and in investments that have economic characteristics substantially identical to the component values ​​of the index,” Grayscale said.

Securities included in the index will “generally consist of” exchange-traded products (ETPs), notes and other pooled investment instruments that hold or are backed by physical Bitcoin and “meet certain asset and liquidity thresholds”, and Bitcoin mining companies that “generate a significant portion of their earnings from Bitcoin mining activities or mining-related hardware, software, services and/or projects.”

Bitcoin ETPs must meet minimum assets under management and liquidity factors to be included in the index. Bitcoin mining companies will be selected based on their level of mining activity and the revenue generated from those activities, in addition to certain market capitalization and liquidity thresholds.

The index will be reconstituted and rebalanced on a quarterly basis, with effect on the last trading day in March, June, September and December. Grayscale Advisors, LLC, an SEC-registered investment adviser previously formed by Grayscale, will act as investment adviser to the ETFs issued by the new trust.

“The creation of the Grayscale Funds Trust reflects our dedication to scaling Grayscale’s business responsibly,” said Grayscale CEO Michael Sonnenshein. “We are laying the necessary foundation so that Grayscale can continue to create and manage regulated, forward-looking products.”

This new fund from Grayscale comes as the firm explores different approaches to getting a spot Bitcoin ETF approved in the US, a move the SEC has so far been reluctant to make. To date, the regulator has rejected more than a dozen spot Bitcoin ETFs, including those filed by SkyBridge, Grayscale, WisdomTree and ARK 21Shares.

Grayscale is also motivated to launch spot ETFs, in part due to the struggles of its cryptocurrency trust products, which have traded at negative premiums ranging from -25% to -62% for certain trusts over the past year.

This latest launch by Grayscale also shows that firms are still committed to bringing a spot BTC ETF to market. On Tuesday, Cboe Global Markets announced it filed a proposal with the SEC to list and trade shares of the ARK 21Shares Bitcoin ETF, a spot bitcoin ETF by Cathie Woods Ark Invest and crypto investment product firm 21Shares, on the Cboe BZX exchange. This is the third time Cboe has applied for approval of a spot Bitcoin ETF with the SEC.