Grayscale Investments LLC is building up the team behind its cryptocurrency exchange-traded fund (ETF), although the SEC is unlikely to approve one this year.
To drive its efforts in converting the $25 billion Grayscale Bitcoin Trust (GBTC) into an ETF, Grayscale hired David LaValle as its global head of ETFs. Besides acquiring the former CEO of custom index provider Alerian, Grayscale is looking to fill at least ten other ETF-related roles.
Grayscale CEO Michael Sonnenshein previously said the asset manager is “100% committed” to the conversion. In fact, he reiterated that ETFs are the intended final products of all of Grayscale’s cryptocurrency-based trusts. If converted, GBTC would become the third-largest commodity ETF. Compared with global commodity exchange-traded products, GBTC would rank second with $34 billion in AUM, behind only SPDR Gold Trust (GLD).
Grayscale first submitted an application for a bitcoin ETF to the SEC in 2016. These then included talks for the better part of 2017. However, the fund manager ultimately withdrew its application because they believed the regulatory environment was not conducive enough for the product. Despite reaffirming its commitment, Grayscale gave no indication when it might convert GBTC to an ETF, citing the regulatory environment.
Collaboration with BNY Mellon
Grayscale also recently announced its partnership with Bank of New York Mellon. Grayscale will be leaving administrative functions of GBTC, which are currently handled in-house, to BNY Mellon starting in October. America’s oldest bank will also handle transfer agency and ETF-related help for GBTC’s conversion. These efforts represent the firm’s ambition to become a leading issuer of crypto ETFs.
“We’re focused on creating a number of products to be a world-class ETF issuer,” LaValle said. “We’re in a unique position. We actually have a product in the marketplace, so it puts us in a great spot.”
The SEC’s hesitation
However, despite all these efforts, it still seems unlikely that the Securities and Exchange Commission (SEC) will approve a crypto ETF this year. Upon filing with the SEC, Grayscale will join over a dozen investment firms that have already done so this year. While several have been rejected or withdrawn, a single application has yet to be accepted.
While familiar with cryptocurrencies, this does not mean recently inaugurated SEC Chairman Gary Gensler is sympathetic to them. He recently prioritized establishing a robust regulatory framework for cryptocurrencies he said would also help the adoption of blockchain technology. It had been speculated that he may be using the crypto ETF process to leverage more control over cryptocurrency exchanges.
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