Barry Silbert of DCG Wins the SEC ETF Deadlock, but Investors Lose
- Digital Currency Group (DCG), the company that runs CoinDesk, has a subsidiary called Grayscale.
- Grayscale would suffer a significant loss in fee income if GBTC were converted to an ETF because the company charges a 2 percent fee on the underlying assets regardless of the discount.
- Selkis, though, believes Grayscale won’t take the initiative since doing so would require forfeiting hundreds of millions in fees.
The SEC’s decision is a big blow to GBTC’s parent company, Grayscale Investments, which has been aggressively marketing the trust as a way to invest in Bitcoin without having to deal with the complexities of actually owning the cryptocurrency.
It’s also a setback for the broader crypto industry, which has been working hard to convince regulators that Bitcoin is a legitimate asset class worthy of investment.
The SEC’s primary concern seems to be that there isn’t enough liquidity in the market for Bitcoin and that the shares of GBTC might not accurately reflect the underlying asset.
While Grayscale has sued the SEC in an effort to persuade them to reconsider, Ryan Selkis of Messari Research has outlined a few possibilities that he believes might result from this mess.
In the event that GBTC is converted to an ETF, it would be a significant loss in fee revenue for Grayscale. This is because Grayscale charges a 2% fee on the underlying assets, regardless of the discount. If GBTC were to become an ETF, it would no longer be subject to this fee. As a result, this would be a significant blow to Grayscale’s bottom line.
Grayscale’s revenue would be destroyed by more than 50% in a “winning” lawsuit and eventual ETF conversion. An ETF would include a wide-open redemption window and maybe lower costs in order to maintain AUM (assets under management).
Selkis stated
We’re talking about a loss for DCG of almost $200 million annually.
The question that remains is whether Grayscale is promoting the ETF in good faith. Or was a giant farce ordered from Silbert’s secret hideout in Stamford?
Barry Pene is a stern blockchain research/copywriter. Barry has been trading cryptos since 2017 and has been invested in issues that would put the blockchain industry on the right pedestal. Barry's research expertise cuts across blockchain as a disruptive technology, DeFis, NFTs, Web3, and reduction of energy consumption levels of cryptocurrency mining.
