Barry Silbert Resigns Amid Grayscale's ETF Approval Bid and Cash Creation Model Switch
Summary:
Grayscale, the digital asset management firm, updated its S-3 document for the U.S. Securities Commission on the same day that its board member Barry Silbert resigned. This event has raised discussions regarding the likelihood of Grayscale converting its Grayscale Bitcoin Trust into a Bitcoin ETF. Observers speculate Silbert's resignation to have been strategic, aimed at boosting the odds of approving the ETF. The revised S-3 application also revealed Grayscale's adoption of a cash creation model, a significant move attracting attention in the cryptocurrency sector.
Digital asset management firm Grayscale made alterations to its S-3 document submitted to the U.S. Securities Commission on the day that Barry Silbert stepped down from the organization's board of directors. Mr. Silbert is also the CEO of Parent company Digital Currency Group, thus his departure is fueling discussions suggesting an improved likelihood of Grayscale converting their Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF. The eventual decision is waiting for approval from the Securities and Exchange Commission.
The ultimate reason behind Silbert’s step down continues to be a center of assumptions. Ramah Luwalia, CEO of Lumida Wealth, theorizes Silbert left out of his free will to enhance the probability of the ETF approval, due to the ongoing SEC investigation into Silbert and DCG. Another speculation from Adam Cochran, partner at cryptocurrency-focused venture capital firm Cinneamhain Ventures, suggests that the resignation was an agreed measure between Grayscale and the SEC to help them back their conversion appeal.
A statement released on December 26 via an 8-K filing to the SEC expressed that Silbert would be succeeded by DCG Chief Financial Officer Mark Shifke as Grayscale’s board chairman. Furthermore, the revised S-3 application revealed Grayscale's submission to a cash creation structure, a noteworthy detail as mentioned by senior Bloomberg ETF analyst Eric Balchunas.
The difference between cash and in-kind creations has been a continuous source of disagreement amid asset managers aiming to introduce a spot Bitcoin ETF and the SEC. While most ETFs based on stock and commodities made use of an in-kind structure, which allows fund participants direct handling of the asset, the cash creation model implies that new shares in a Bitcoin ETF can only be produced or redeemed using cash transactions. This SEC intervention to impede broker-dealers from direct Bitcoin transactions can be seen as an attempt to monitor Bitcoin’s movement from exchanges thereby reducing potential risks linked to anti-money laundering or Know Your Customer compliance.
Scott Johnsson from VB Capital pointed out that even though the SEC alleges to aid investor protection, the cash creation structure could carry more risks for investors searching for exposure to Bitcoin through a Bitcoin ETF. He further wrote on a note that although all other spot commodity ETFs operated via in-kind models, this needs to be achieved in an entirely new manner via cash, which could potentially lead to complications.
Published At
12/27/2023 6:00:00 AM
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