Grayscale Proposes GBTC Fund Amendment as Spot Bitcoin ETF Looms

Last updated: November 30, 2023 01:32 EST
. 2 min read

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1701325840-1698262854-grayscale-3 — Source: Adobe / Ascannio

Grayscale, the manager of the Grayscale Bitcoin Trust (GBTC), has proposed amendments to the trust’s agreement in preparation for a potential uplisting to a spot Bitcoin (BTC) exchange-traded fund (ETF).

The move aims to align GBTC’s structure with other applicants, including asset management giant BlackRock, and optimize its position in the evolving market.

The proposed updates, which will be subject to a shareholder vote, involve two key modifications to the trust agreement, according to a Wednesday filing.

Firstly, the amendment enables the collection of fees on a daily basis instead of the current monthly collection.

Notably, this structural change is separate from any potential fee reduction, which Grayscale has committed to but is yet to finalize.

Currently, GBTC charges a 2% management fee, while typical fees for firms awaiting spot bitcoin ETF approval range from 0.7% to 1%, as per Matrixport’s analyst report.

New Amendment Allows for Comingling of Assets

The second proposed update allows for the commingling of assets in an omnibus account, streamlining the creation and redemption of shares.

The enhancement is made possible through the Coinbase Custody service, which will also be employed by BlackRock iShares and other spot ETF applicants.

The efficient processing mechanism is crucial for ETFs, as it facilitates the seamless trading and tracking of underlying assets.

Grayscale’s proposed amendments are part of its ongoing efforts to optimize the GBTC structure and ensure readiness for an uplisting to NYSE Arca as a spot bitcoin ETF, pending regulatory approvals.

It is worth noting that the amendments are not essential for the conversion to an ETF, according to the filing.

Shareholders have a 20-day period from the filing date to cast their votes on the proposed updates.

SEC to Approve Several ETF Applications at Once

Industry analysts anticipate that the U.S. Securities and Exchange Commission (SEC) will approve multiple spot bitcoin ETFs in rapid succession.

Meanwhile, the specific company that will offer the ETF and the implications for the crypto markets, which have experienced a prolonged slump, remain uncertain.

Grayscale has been at the forefront of the legal battle to secure SEC approval for a Bitcoin ETF, a type of fund that has been available in Europe and Canada for years.

As the court proceedings started to favor Grayscale, major players in the financial industry, including BlackRock and Fidelity, also filed applications to offer their own ETFs.

Given the optics, it would not be surprising if the SEC grants approval to a well-known traditional finance company like BlackRock first.

The optimism around the launch of a spot Bitcoin ETF has fueled the recent rally in crypto markets, which saw the flagship cryptocurrency reach $35,198, the highest level since May 2022.

However, estimating the demand for an ETF is challenging due to the diverse range of metrics used by investors and analysts.

Crypto firm NYDIG estimates the demand for a spot bitcoin ETF at approximately $30 billion.