Grayscale’s Amended Bitcoin ETF Bid Raises Concerns Over Names Omission

Several companies have recently re-submitted their spot BTC ETF filing to address remaining regulatory issues and pass possible clearance barriers in preparation for the US Securities and Exchange Commission’s (SEC) final decision on these applications on January 10.

However, the updated filing by Grayscale has prompted responses from industry insiders who maintain that many concerns remain unresolved following the firm’s application to convert its Bitcoin Trust (GBTC) into a spot ETF.

Analyzing Grayscale’s Amended S-3 Filings

Senior Bloomberg ETF Analyst Eric Balchunas recently analyzed Grayscale’s revised S-3 filing and made some critical points about the company’s proposed ETF model. Balchunas noted that Grayscale’s desire to use a cash-only formation and redemption method for its ETF was more clearly laid out in the updated filing submitted on December 29.

However, he pointed out the lack of declared authorized participants and the proposed cost structure as a critical cause for skepticism. Earlier this year, Michael Sonnenshein, CEO of Grayscale, said that authorized participants had been present since 2017.

However, Credit Suisse and KCG Americas weren’t involved with the ETF initially; they were with the firm’s Bitcoin trust. Furthermore, the revised filing does not name Virtu and Jane Street as authorized participants, even though Grayscale had already established arrangements with them in June 2022.

The differences between the firm’s CEO’s statements and the content in the updated filing were brought to light by Balchunas’s study, indicating that Grayscale needs to be more transparent and provide a more detailed explanation of their dealings.

Uncertainty Over Grayscale’s ETF Approval Status

Furthermore, Balchunas’ analysis of Grayscale’s official filing has stirred up doubts among potential ETF investors. In a separate post on X, the Bloomberg expert stated, “It isn’t in doc yet (even though that’s what the SEC wants), and till we see, we aren’t counting any of such as official.”

Due to this observation, the inclusion of Grayscale in the expected wave of Bitcoin ETF approvals on January 10 is now in question. In contrast to Grayscale, firms like Fidelity and Blackrock have taken the initiative to update their reports and identify authorized participants (AP).

Yet, another industry expert argues that these fears may be unfounded. This expert opined that Grayscale could have more time to resolve these issues.

No Authorized Participants

According to Scott Johnsson, General Partner at Van Buren Capital, Grayscale’s application approval may not happen in time like other applicants because its proposal lacks an authorized participants’ list. He further notes that including these authorized participants would complete Grayscale’s proposal and guarantee efficacy.

The role of authorized participants as intermediaries for ETFs is crucial. They can purchase the fund’s underlying assets on the issuer’s behalf. In a related development, reports suggest that Goldman Sachs has held talks with Grayscale and Blackrock to become an AP for both firms.

Goldman Sachs joins JPMorgan Chase, which has also made similar moves with a few other firms filing for a spot BTC ETF approval with the US SEC. Meanwhile, many industry experts opine that the rising interest from leading financial institutions like Goldman Sachs and JPMorgan in becoming an AP is a good development for the probable approval of these ETFs by the top US regulator.