- Grayscale made changes to its Grayscale Bitcoin Trust (GBTC), including removing the 2% creation fee and allowing more flexibility in custody arrangements. These changes bring GBTC closer to a spot bitcoin ETF structure.
- The new fee structure starts at 1.5% for creations between $15-25 million and goes down to 0.5% for creations above $300 million, more in line with ETF fees.
- The custody change provides more flexibility in custodians, which many believe will satisfy SEC expectations for a spot bitcoin ETF.
Grayscale Investments, the world’s largest digital asset manager, is gearing up to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF).
The firm updated GBTC’s trust agreement last week in what it described as a move to provide “operational efficiencies” around the creation and redemption of shares. Industry observers believe this brings Grayscale one step closer to meeting U.S. Securities and Exchange Commission (SEC) requirements for converting the trust into an ETF.
GBTC Fee Changes
One of the key changes in the new trust agreement involves GBTC’s fee structure.
Previously, authorized participants creating new GBTC shares were charged a 2% fee. That’s now being scrapped in favor of a sliding scale that starts at 1.5% for creations between $15 million and $25 million and goes down to 0.5% for creations above $300 million.
The move brings Grayscale’s fees closer in line with those of other ETFs.
Custody Changes
The other notable change involves custody arrangements for the bitcoins backing GBTC shares.
Previously, authorized participants contributed bitcoin to Grayscale, which were held in a custodial wallet with Coinbase. Withdrawals happened in the opposite direction, with Grayscale sending bitcoin from its Coinbase account.
Now, Grayscale has done away with the requirement to custody assets with Coinbase. The firm said this gives it more flexibility in choosing custodians and structuring its custody arrangements.
Many believe this change will also help Grayscale satisfy the SEC’s expectations around custody for a spot bitcoin ETF. Rival bitcoin ETF applicants have emphasized their custody arrangements when seeking regulatory approval.
Path to Spot Bitcoin ETF
With its trust structure already similar to that of an ETF, the changes bring GBTC closer to something the SEC could approve for public trading.
Grayscale has previously said it would convert GBTC into an ETF as soon as regulators allow it. With the trust tweaks, the firm now appears to be laying the groundwork for an easier transition once it gets the green light.
The SEC has rejected over a dozen spot bitcoin ETF applications so far. But Grayscale’s unparalleled size and familiarity may give it an edge over other applicants when regulators finally relent. With $24 billion in assets under management, the firm already oversees over 3% of the bitcoin supply.
Conclusion
By scrapping GBTC creation and redemption fees and allowing more flexibility in custody arrangements, Grayscale has brought its flagship bitcoin trust closer in line with an ETF structure. The long-awaited spot bitcoin ETF may not be too far off if regulators take note of Grayscale’s latest changes.
