Digital Assets: Grayscale Files For ETF That Invests In Overseas Spot Bitcoin ETFs And Bitcoin Mining
It is likely a creative way from Grayscale to sidestep the SEC’s aversion to spot bitcoin ETFs.
Grayscale, the world’s largest cryptocurrency fund manager, is attempting to work around regulatory restrictions imposed by the US Securities and Exchange Commission (SEC) by filing to launch a US-listed exchange-traded fund (ETF) that would invest in bitcoin exchange-traded products (ETPs) already operating in other countries.
Grayscale has filed to launch a Global Bitcoin Composite ETF, which would invest 40% of its assets in spot bitcoin ETPs listed on major non-US exchanges, such as in Canada or Europe. The remaining 60% of the portfolio would be invested in bitcoin mining company equities.
Foreign-based ETPs either hold physical bitcoin or synthetically track its price, structures that the SEC has not yet permitted.
However, analysts believe there is a chance of approval for this ETF since the overseas ETPs that Grayscale plans to invest in are regulated securities, which is what the SEC has required for crypto ETFs.
Meanwhile, Grayscale has sued the SEC for its refusal to allow its Grayscale Bitcoin Trust (GBTC) to convert into an ETF, and a ruling is expected by the end of the third quarter. In one view, Grayscale’s filing is seen as a way to challenge the SEC’s past decisions regarding bitcoin futures ETFs versus spot bitcoin ETFs.
While approval for the proposed ETF is not guaranteed, it offers a novel approach to provide US investors with exposure to spot bitcoin.
However, skepticism remains about the demand for such a product, which may not be appealing to investors for its mix with crypto mining.
ETFs exposed to bitcoin have had limited interest despite the recent rally in bitcoin and crypto-related companies.
However, Grayscale CEO Michael Sonnenshein believes that investors’ appetite for crypto remains healthy and notes the high returns achieved by cryptocurrencies in 2023.
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