Grayscale publishes roadmap for turning its products into crypto ETFs

The digital asset manager, Grayscale has renewed its push to release a Bitcoin exchange-traded fund in the American asset markets.

Grayscale publishes roadmap for turning its products into crypto ETFs

According to a blog posted on Monday, two of its biggest funds, GBTC and ETHE are on the short-list to become proper ETFs. However, the company has not indicated any concrete efforts, such as going through any process with the SEC, nor has it provided meaningful timelines for these plans.

Grayscale is one of the major platforms providing cryptocurrency exposure in traditional markets, managing several trusts for major cryptocurrencies including Bitcoin and Ethereum, Bitcoin Cash.

The roadmap shows each trust fund has parted into four main categories based on the development. The first is the private placement phase, where funds are only for sale and purchase in over-the-counter dealing directly with the company.

The second category includes publicly-listed shares on secondary markets, meaning that the trust fund receives a ticker symbol and becomes tradable publicly. Trust funds for Bitcoin Cash, Litecoin and Ethereum Classic fall into this category. Finally, the most advanced trusts achieve “SEC reporting” status, committing to temporary disclosure of their balance sheets and operations to the Securities and Exchange Commission. Only the Bitcoin and Ethereum trusts are reporting to the SEC currently.

The third category is ETF, a completely regulated and liquid fund. ETFs are usually used for exposure to indexes or baskets of assets in U.S. stock markets. ETFs generally have lower management fees, achieve wider reach than trusts, and are designed to follow their net asset value very closely. 

The GBTC fund has recently collapsed to become a penalty, trading currently 10% below NAV. Loss of this premium, coupled with stiff competition from Purpose Bitcoin ETF in Canada, may have put Grayscale into action.

The promise of a Bitcoin ETF has been one of the driving Bitcoin narratives since around 2017 when Grayscale first attempted to file for an ETF with the SEC. Regulators have consistently rejected these filings, often citing the unregulated nature of Bitcoin infrastructure as the main hurdle to overcome. 

Bitwise’s application for a Bitcoin ETF was severely a motivation for publishing its report on exchange volume in 2019, where it reported that roughly 90% of the volume was in fact non-existent. This argument was put in action by the firm to prove that most of Bitcoin’s price formation occurred on regulated exchanges but that did not convince regulators at the time.