SEC further delays decision on Grayscale’s Bitcoin spot ETF

abdelaziz Fathi

The top US regulator is pushing out its review of a Bitcoin exchange-traded funds (ETF) proposal by Grayscale, issuing a fresh deadline extension notice as it asks for additional public comments.

Grayscale

In October, Grayscale Investments, a subsidiary of Barry Silbert’s Digital Currency Group, said it plans to convert its Grayscale Bitcoin Trust into a spot bitcoin ETF. But the US Securities and Exchange Commission said it needs more time to consider the proposed rule change and any comments received.

The extension comes a few days after the SEC also delayed its decision on a spot bitcoin exchange-traded fund (ETF) proposal by Bitwise Asset Management. The regulator also rejected another bid to list a spot bitcoin exchange-traded fund (ETF), which is widely seen as a proxy into crypto for millions of retail investors. The SEC denied an application by First Trust Advisors and SkyBridge, citing concerns over “fraudulent and manipulative acts and practices” in markets where bitcoin is traded.

There are a number of applications underway to get a bitcoin ETF listed, but so far none have been approved by the SEC. The agency only extended the deliberation window or opened the matter to public comments to avoid reaching any decision on a proposal, meaning today’s delay is no surprise.

GBTC shares traded at a discount

In response to the SEC’s procrastination, Grayscale Bitcoin Trust share has widened its discount relative to the underlying cryptocurrency held in the fund. At one point last month, DCG’s flagship GBTC shares traded at a discount of 21.6% to net asset value (NAV) today.

The Grayscale Bitcoin Trust (GBTC), which owns 3.5 per cent of the world’s bitcoin, had traded at a substantial premium to NAV for much of its existence. However, it has continuously traded at a discount since the emergence of the first North American bitcoin ETF in Canada.

In the past six months, the discounts have grown bigger and updated its all-time high it hit earlier in May at 20%. In the 12 months to the end of November, while Bitcoin price had recovered up to $69,000, Grayscale has been slower to catch up.

GBTC is a closed-end fund with a six-month lock-up of initial investments, which means it cannot easily add or remove shares to deal with inflows and outflows. As a result,  the fund subscribers are unable for some time to redeem their shares in reaction to the spot price of bitcoin. Thus, its share price tends to trade at either a premium or a discount, rather than being tied to the underlying value of its assets.

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