GBTC Evolution: A Forward Leap

Grayscale, the entity overseeing the Grayscale Bitcoin Trust (GBTC), has recently revised its trust agreement.

These alterations, marking the first adjustments since 2018, aim to fortify GBTC’s structure for a potential shift towards a spot Bitcoin exchange-traded fund (ETF) and foster a more equitable competition environment, especially against significant players like the renowned asset management firm BlackRock.

Noteworthy Adjustments in GBTC Framework

Grayscale's proposed changes, pending approval, encompass a transition in the method of collecting management fees, shifting from a monthly to a daily basis.

A spokesperson from the company clarified that this structural modification is distinct from potential yet-to-be-finalized fee reductions. Presently, Grayscale enforces a 2% management fee on GBTC, notably higher than the 0.7%-1% typical range for firms awaiting approvals for spot Bitcoin ETFs.

The second pivotal update involves amalgamating assets in omnibus accounts, a strategic move expected to streamline the creation and redemption of shares. This procedure is essential for the functionality of ETFs and mirrors a feature of Coinbase Custody’s service, already embraced by other ETF aspirants, including BlackRock’s iShares product.

A representative from Grayscale emphasized that these modifications align with standard business practices, asserting GBTC’s readiness to transition to a spot Bitcoin ETF on NYSE Arca, contingent upon regulatory approvals.

No Additional Burden on Shareholders

Grayscale assures shareholders that these amendments will not result in additional costs. Shareholders are also encouraged to cast their votes in favor of the proposals, which could potentially bring about operational efficiencies, albeit being optional for a prospective GBTC spot ETF conversion. The filing date allows shareholders a 20-day window to vote on these proposals.

Possible downsides include potential increased costs and more frequent fee payments. A marginal risk is associated with blending assets held in omnibus accounts. However, the majority of assets will continue to be held in separate custody accounts.

In a related development, BlackRock recently engaged with the SEC’s Trading and Markets division, presenting a revised model for redemption flow.

Looks like BlackRock met with the SEC's Trading & Markets division again yesterday and gave presented them with a "revised" in-kind model design based on Staff's comments at their 11/20 meeting.. h/t @btcNLNico here's full doc: https://t.co/sgOpY5D1jz pic.twitter.com/863pWOX6w0

— Eric Balchunas (@EricBalchunas) November 29, 2023

This division, responsible for greenlighting or rejecting ETF applications, was spotlighted in an “educational” video by SEC Chair Gary Gensler, elucidating its pivotal role. Bloomberg ETF analyst James Seyffart pointed out that historically, this division has turned down all spot Bitcoin ETF applications.

The race for ETF approval is escalating, with Pando being the latest to submit an application on November 29. Analysts uphold a 90% likelihood of a spot Bitcoin ETF approval by January, hinting at a potentially transformative phase in the cryptocurrency space.

Read more: MicroStrategy's Crypto Momentum: Billion-Dollar BTC Moves