Grayscale Investments LLC Chief Executive Officer Michael Sonnenshein isn’t sure yet whether the firm needs to refile an application with the SEC to offer an ETF that invests directly in Bitcoin after winning a key dispute with the regulator.
(Bloomberg) — Grayscale Investments LLC Chief Executive Officer Michael Sonnenshein isn’t sure yet whether the firm needs to refile an application with the SEC to offer an ETF that invests directly in Bitcoin after winning a key dispute with the regulator.
“We will have to see upon the final operational procedures that come through that final mandate that the court will issue,” Sonnenshein said Wednesday on Bloomberg Television. “We don’t know what the final opinion will say until we reach the end of that period,” which is 45 days from the ruling, he said.
The crypto asset-manager on Tuesday scored a legal victory in federal court in its bid to launch the first US ETF that would invest directly in Bitcoin, a key development for the digital-assets industry. The company has argued that a conversion of its Bitcoin trust, known as GBTC, could unlock billions in value for its holders, and its win is being seen as monumental for the industry.
Read more: Crypto Scores Landmark US Legal Win With Grayscale ETF Ruling
Prospective US issuers have been rebuffed time and again in trying to launch one, attempts for which go back roughly a decade. Still, a slew of companies, including BlackRock Inc. and Invesco, among others, are trying their hand at one, as some analysts argue that the SEC has shown signs of softening its previously harsh stance toward digital assets, at least when it comes to some exchange-traded products.
Although Tuesday’s ruling is seen by many observers as a stinging rebuke to the SEC, it does not yet mean that a Bitcoin ETF is guaranteed to launch. The regulator said it is reviewing the decision, and Grayscale itself said it was reviewing the details outlined in the opinion and would be sharing more information on the conversion process “as soon as practicable.”
But “there really shouldn’t be any further grounds like the SEC has been relying on to continue denying these types of products from coming to market,” Sonnenshein said. He added that the company hasn’t heard from the SEC since the ruling.
Shares of GBTC rallied 17% on Tuesday, outpacing gains posted by Bitcoin, which rose 6%. Still, it dropped more than 4% on Wednesday and its discount to its underlying holdings stands at around 18%, data compiled by Bloomberg show.
The discount is unlikely to go to zero until an official conversion, which would allow ETF-structure arbitrage mechanisms to take care of all premiums or discounts on the product, happens, said James Seyffart, an analyst at Bloomberg Intelligence.
“The discount shows that the market is more confident in conversion today than they were a few days ago, but still not completely confident that GBTC will convert,” he said. “It’s not illogical considering the animus that Gensler and the SEC have shown towards crypto more broadly,” he said, referring to SEC Chair Gary Gensler.
A lot remains unclear about the path forward for a potential spot-Bitcoin ETF in the US, given that so many other companies, besides Grayscale, are attempting for one. For one, analysts are trying to decipher which companies might be allowed to put out their products first, or whether multiple could go at once. Another key outstanding question is what Grayscale would do with regards to its fee on GBTC, which currently stands at 2%, a much higher expense than ETFs typically tend to charge. Sonnenshein reiterated on Wednesday that the company is “committed to lowering fees when GBTC converts to an ETF.”
Either way, in his view, “crypto as an asset class is most certainly here to stay,” he said during the interview.
“Yesterday was the culmination of more than a year worth of litigation,” he said. “Huge win for Grayscale, huge win for our investors and really the crypto and investment communities as a whole.”
–With assistance from Sonali Basak and Dani Burger.
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