Grayscale Investments LLC is assembling a team to support its cryptocurrency exchange-traded fund (ETF), despite the fact that the SEC is unlikely to approve one this year.
Grayscale hired David LaValle as its global head of ETFs to spearhead its efforts to convert the $25 billion Grayscale Bitcoin Trust (GBTC) into an ETF. Grayscale is looking to fill at least ten other ETF-related positions, in addition to acquiring the former CEO of custom index provider Alerian.
Grayscale has made a commitment
Grayscale CEO Michael Sonnenshein previously stated that the asset manager is “100% committed” to the conversion. In fact, he reiterated that all of Grayscale’s cryptocurrency-based trusts are designed to produce ETFs. GBTC would become the third-largest commodity ETF if converted. With $34 billion in AUM, GBTC ranks second among global commodity exchange-traded products, trailing only SPDR Gold Trust (GLD).
Grayscale initially applied to the SEC in 2016 for a bitcoin ETF. These then included discussions for the majority of 2017. However, the fund manager eventually withdrew its application because they believed the regulatory environment was insufficiently supportive of the product. Despite reaffirming its commitment, Grayscale provided no timeline for converting GBTC to an ETF, citing the regulatory environment.
Partnership with BNY Mellon
Grayscale has also recently announced a collaboration with Bank of New York Mellon. Beginning in October, Grayscale will outsource GBTC’s administrative functions, which are currently handled in-house, to BNY Mellon. The country’s oldest bank will also handle transfer agency and ETF-related assistance for GBTC’s conversion. These efforts reflect the firm’s ambition to become a leading issuer of cryptocurrency ETFs.
“We are focused on developing a number of products in order to become a world-class ETF issuer,” LaValle explained. “We are in a unique situation. We actually have a product in the market, which puts us in a good position.”
The SEC’s hesitancy
Despite these efforts, it appears unlikely that the Securities and Exchange Commission (SEC) will approve a cryptocurrency ETF this year. Grayscale will join over a dozen other investment firms that have already filed with the SEC this year. While several applications have been rejected or withdrawn, only one has yet to be accepted.
While familiar with cryptocurrencies, newly appointed SEC Chairman Gary Gensler is not a supporter of them. He recently prioritized the creation of a strong regulatory framework for cryptocurrencies, which he claims will aid in the adoption of blockchain technology. It was speculated that he was using the crypto ETF process to gain more control over cryptocurrency exchanges.