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Top executives from asset management giant Grayscale recently met the U.S. Securities and Exchange Commission (SEC) to discuss details of its flagship GBTC trust product, which the company wants to turn into a spot market exchange-traded fund (ETF). The meeting comes after a court last month asked the Commission to revisit Grayscale’s application. 

Grayscale Investments has long harbored ambitions to convert the GBTC into a spot ETF, which would allow it to be traded like a stock on a national securities exchange, such as NYSE Arca or Nasdaq.

Investors have been calling for a Bitcoin ETF for the better part of a decade, but the SEC has always rejected each and every application, citing concerns about market manipulation.

But in October 2023, the Court of Appeals ordered the regulator to re-review Grayscale’s application after the firm sued the SEC for refusing to allow the fund’s conversion into an ETF.

While the SEC could still reject Grayscale’s application, there has been some notable progress. According to a November 20 memo published by the SEC, Grayscale CEO Michael Sonnenshein, legal chief Craig Salm, ETF head Dave LaValle, and four other executives, along with five representatives of Davis Polk law firm, met with the agency’s Division of Trading and Markets. 

This SEC division would have a role in shaping and approving the firm’s ETF application. As Bloomberg Intelligence analyst James Seyffart noted in a post on X, the trading and markets division is responsible for greenlighting or rejecting 19b-4s — the form used to inform the regulator of a proposed rule change by a self-regulatory organization.

“The discussion concerned NYSE Arca, Inc.’s proposed rule change to list and trade shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E,” the memo stated.

Seyffart also pointed out that Grayscale had entered into a Transfer Agency and Service Agreement with the Bank of New York Mellon. The bank will serve as the agent for its GBTC fund, enabling the issuance and redemption of shares and maintaining shareholder accounts. The Bloomberg analyst observed that Grayscale’s deal with BNY Mellon “is likely something that was always going to be required at some point” and does not necessarily mean the GBTC’s conversion is coming soon.

The prospect of a spot Bitcoin ETF approval has buoyed the crypto market, with Bitcoin surging to an 18-month high of nearly $38,000 in recent weeks as news emerged that the SEC had an eight-day window to approve all spot crypto exchange-traded product applications all at once. Bitcoin is changing hands at around $36,630 at publication time, down 2% on the day.

But that window closed on Nov. 17 and the long-awaited ETF product has not yet dropped. Rather, the SEC has deferred decisions on pending filings, like it has done so many times in the past, and will now revisit them in 2024.

Grayscale is among a number of traditional finance titans, including BlackRock, VanEck, Fidelity, and WisdomTree, seeking the SEC’s regulatory blessing for spot Bitcoin ETFs. Seyffart also disclosed that he “heard rumblings of other potential spot bitcoin ETF issuers meeting with SEC in the last week or so.”

According to him, there’s still a 90% chance of ETF approvals by Jan. 10, 2024.

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