Grayscale Submits Bitcoin ETF Filing with SEC to Adopt Cash Redemption Model

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Hongji Feng

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Hongji Feng

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Hongji is a crypto and tech reporter. He graduated from Northwestern University's Medill School of Journalism with a Bachelor's and a Master's. He has previously interned at HTX (Huobi Global),...

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December 26, 2023

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Grayscale has submitted an updated filing to the Securities and Exchange Commission, paving the way for its GBTC to transition into a spot Bitcoin exchange-traded fund (ETF) with the adoption of a cash redemption model.

According to Bloomberg Intelligence ETF research analyst James Seyffart, Grayscale has just submitted an amended S-3 filing with the SEC to convert GBTC to Bitcoin ETF, attempting to adopt the cash redemption model.

“Even Grayscale is accepting the SEC’s Cash-only creation/redemption edict. Looks like they’re bending the knee,” said Seyffart. BlackRock and ARK Invest and 21Shares have also previously turned to this model for regulation and compliance purposes.

Grayscale Bitcoin ETF Adopts Cash Redemption

Essentially, through the cash creation and redemption model, the investors must use cash for transactions in exchange for Bitcoin holdings. On the contrary, the investors cannot “hand in btc in exchange for ETF shares like in most ETFs,” according to Bloomberg Intelligence ETF analyst Eric Balchunas.

Grayscale finally surrendering to cash-only creations, was a big holdout. Pretty sure they have an AP agreement (a crucial last step) so that would check all the boxes. That said, still a mystery whether they will be allowed to go on day one of the Cointucky Derby https://t.co/Wm7TfD3zkP

— Eric Balchunas (@EricBalchunas) December 26, 2023

The filing indicated that “Participant can only submit Cash Orders, pursuant to which the Authorized Participant will deposit cash into, or accept cash from, the Cash Account in connection with the creation and redemption of Baskets.”

“The Trust is currently able to accept Cash Orders,” wrote the filing. “However, and in common with other spot Bitcoin exchange-traded products, the Trust is not at this time able to create and redeem shares via in-kind transactions with Authorized Participants.”

In addition, according to finance lawyer Scott Johnson, Grayscale’s filing included a confusing change to airdrops and forks.

“The only real headscratcher in the GBTC S-3 amendment is a change to airdrops/forks whereby Grayscale is definitively abandoning all of them,” said Johnson, “Not clear to me why they made this change… Feels like this would be explained by SEC mandating this behavior, but other issuers haven’t made similar changes.”

Hashdex Meets with SEC Chair Gary Gensler

Meanwhile, other spot Bitcoin ETF issuers have been busy as well during this holiday. Seyffart revealed a memorandum that documented the scheduling of Hashdex’s meeting with the SEC on Dec. 26.

Varying from most meetings the SEC has held with the issuers, this time Hashdex’s CIO and Head of Products Samir Kerbage met at the SEC Chair Gary Gensler’s office. It is more commonly seen for the issuers to speak with the Trading and Markets or Corporate Finance divisions, instead of discussing with Gensler directly.