Grayscale – who dumped XRP amid SEC v. Ripple – partners with BNY Mellon ahead of ETF conversion

Rick Steves

Grayscale plans to convert Grayscale Bitcoin Trust into an ETF in accordance with the firm’s strategic product pipeline.

Grayscale Investments has selected BNY Mellon as an asset servicing provider for Grayscale Bitcoin Trust (OTCQX: GBTC), effective October 1, 2021.

BNY Mellon will provide Grayscale Bitcoin Trust with fund accounting and administration as well as transfer agency and ETF Services for the Grayscale Bitcoin Trust upon its conversion to an ETF.

The Grayscale Bitcoin Trust is worth nearly 40,000 bitcoins. The conversion to an ETF will unlock its shares and could move the markets in unpredictable ways, but price pressure may actually never realize, said Kirill Suslov, CEO of trading app TabTrader.

“It depends on who the investors are. Usually, institutions rebalance their portfolio according to the mandate. So if they are underwater, because the bitcoin price has dropped, they will actually have to buy more to keep the mandated allocation to this asset class.”

“We have to notice that it is not BTC getting unlocked, as it’s just the Grayscale shares (GBTC), and as the trust has no redemption mechanism, GBTC cannot sell its bitcoin holdings. So the unlocking of GBTC shares should not move the spot price of BTC. However, misleading and complex information lets investors worry and, therefore, can create short-term bearish anxiety. Additionally, a sell-off of GBTC could put additional pressure on Grayscale to increase their share buyback strategy to lower the discount to the NAV of the trust and medium-term, create a bullish trend for GBTC shares”, said Laurin Bylica, Co-Founder of TheStandard.io.

Ulrik K.Lykke, Executive Director at ARK36, said: “Investors should note that no actual spot Bitcoin is being released so, in theory, the unlocking of GBTC shares should not have any direct effect on the Bitcoin spot market. However, if all investors holding the currently locked-up shares rushed to exit their investment at the end of this lockup and started mass selling their shares, it would likely exert downward pressure on the BTC price.”

Scalability, resiliency, and automation are a few of the benefits that BNY Mellon’s platform can offer Grayscale, but its proprietary ETF Center – designed to support digital asset ETFs – will prove valuable as the subsidiary of Digital Currency Group prepares the move to ETFs.

Grayscale Investments is the world’s largest digital currency asset manager, with more than $30B in assets under management as of July 9, 2021. Grayscale products are distributed by Genesis Global Trading.

Michael Sonnenshein, CEO of Grayscale Investments, commented: “Engaging BNY Mellon is an important milestone as part of our commitment to converting Grayscale Bitcoin Trust into an ETF. BNY Mellon has a long-standing reputation as a trusted provider and has established one of the first teams dedicated to servicing the growing digital currency asset class. We are pleased that BNY Mellon will join a group of Grayscale’s best-in-class service providers, helping us deliver a seamless, industry-leading investment experience.”

Roman Regelman, CEO of Asset Servicing and Head of Digital at BNY Mellon, said: “Providing essential fund administration services to the world’s largest digital currency asset manager further validates that BNY Mellon stands squarely at the intersection of trust and innovation. It’s another critical milestone in our rapidly growing digital asset capabilities and broader strategy of putting client choice at the center of everything we do.”

Grayscale plans to convert Grayscale Bitcoin Trust into an ETF in accordance with the firm’s strategic product pipeline. The relationship with BNY Mellon ensures Grayscale Bitcoin Trust is positioned for long-term success in the eyes of both parties.

With over $1T in ETF assets, including being the market-leading servicer of commodities exchange-traded products, BNY Mellon’s collaboration with Grayscale expands the Bank’s footprint in the digital asset space.

Grayscale began the dissolution of its XRP Trust in January following the U.S. Securities and Exchange Commission’s lawsuit against Ripple Labs, which alleges the XRP token is a security under federal securities law.

“It is likely to be increasingly difficult for U.S. investors, including the Trust, to convert XRP into U.S. dollars, and therefore continue the Trust’s operations”, the firm said at the time.

The XRP trust had raised $19.2 million from 70 investors over its nearly three-year run, but it is unclear how much it was worth at liquidation.

The price of XRP took a dive once the SEC filed the complaint against Ripple Labs and its co-founders Brad Garlinghouse and Chris Larsen, but despite the trust dissolution and the many XRP delistings from leading US cryptocurrency exchanges, the market remained quite dynamic, even skyrocketing towards the $2 mark in April 2021.

The price is currently subdued just above $0.60, which is still higher than the day the lawsuit was failed, December 22, 2020.

 

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