Grayscale's Strategic Shift: Aiming for Bitcoin Spot ETF with Cash Redemption Model

blockchain.news:

Grayscale Investments has amended its S-3 filing with the U.S. Securities and Exchange Commission (SEC). This move is aimed at transitioning the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin Exchange-Traded Fund (ETF). Notably, the amendment follows the resignation of Barry Silbert as the chairman of Grayscale, marking a new chapter in the company's direction​​​​.

Regulatory Compliance and Strategic Positioning

Grayscale's amendment reflects a compliance with the SEC’s guidelines, notably pivoting to accept only cash orders. This decision is not just a mere compliance tactic; it signifies a strategic shift. Grayscale is positioning itself to compete with significant players like BlackRock in the ETF market. This move is especially crucial as Grayscale prepares for a significant approval deadline in January. The company is adapting its structure, transitioning from a monthly to a daily fee structure and simplifying the share creation and redemption process, indicating readiness to make a substantial impact in the ETF arena​​.

The Cash Creation Model

A critical aspect of Grayscale’s amended S-3 filing is the adoption of a cash creation model. This model means that new shares in a spot Bitcoin ETF can only be created or redeemed through cash transactions, contrasting with the in-kind model used by most stock and commodity-based ETFs, where fund market participants directly handle the asset in the fund. The shift to a cash creation model has been a significant point of contention between asset managers aiming to launch a spot Bitcoin ETF and the SEC. This move is seen as Grayscale «finally surrendering» to the cash creation model, a significant deviation from its previous stance​​​​.

The SEC's preference for the