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Crypto asset manager Grayscale has filed a revised S-3 filing with the U.S. Securities and Exchange Commission (SEC) on Dec. 26 to comply with the regulator’s requirements for cash-only creation for fund redemptions.
This amendment means that Grayscale will make it easier to create and redeem cash funds, mirroring similar decisions made by other Bitcoin ETF cash candidates, including BlackRock.
Eric Balchunas, senior ETF analyst at Bloomberg, characterized Grayscale’s revised submission is a crucial final step toward approving the conversion of its Bitcoin Trust into an exchange-traded fund (ETF).
In recent weeks, the SEC has insisted that ETF applicants manage the funds in a specific way, favoring liquidity creation over the in-kind method.
Typically, traditional ETFs facilitate “in-kind” transactions, allowing market makers to directly exchange the underlying asset for shares of the ETF. In contrast, the “liquidity creation” method requires issuers to exchange cash for ETF shares with each transaction.
However, the SEC’s decision to ban broker-dealers from directly engaging in Bitcoin is seen as part of efforts to address concerns about potential market manipulation and illicit activity.
Meanwhile, Scott Johnsson, general partner at VB Capital, highlighted how the SEC’s insistence on a liquidity creation model could present higher risks for investors seeking exposure to Bitcoin through a spot ETF.
No airdrops or forks
In addition to complying with the SEC’s cash-only requirement, Grayscale’s amended filing shows that its spot Bitcoin ETF shareholders will not benefit from any airdrops or forks of the blockchain network.
The file stated:
“With respect to any fork, airdrop or similar event, Sponsor will require Trust to irrevocably relinquish any ancillary rights or IR virtual currency. In the event the Trust seeks to change this position, an application would be required to be filed with the SEC by NYSE Arca for approval of the change to its listing rules.
In response, Johnson interrogates why the asset manager made this decision, given that other candidates tactically avoided this question. However, he noted that the SEC could have influenced the company’s decision.
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