Grayscale files amended Bitcoin ETF application, omits details of AP and fee structure

Grayscale Investments submitted an amended application for its spot Bitcoin exchange-traded fund (ETF) on Jan. 2, which notably lacks specific details about any Authorized Participant (AP) and the fee structure.

The absence has raised questions and drawn attention, particularly from Bloomberg’s senior ETF analyst Eric Balchunas, who highlighted the missing details in Grayscale’s amendment on social media and questioned why the company had left them out.

Balchunas questioned why the company had not included the names of authorized participants and any information on fees, especially since the SEC expects to see this information in the documentation if companies want to be included in the first tranche of approvals.

Grayscale CEO Michael Sonnenshein recently stated that the firm has had APs lined up since 2017, but the filing did not mention Jane Street Capital or Virtu Financial, the companies it has listed as APs previously.

Missing information

The latest amendment primarily involves adding new exhibits without modifying any existing elements of the prospectus. These additions focus on the trust’s third-party relationships.

Notably, the language around cash-only orders in the ETF has been made more explicit. This adaptation to a cash-only model signifies Grayscale’s readiness to comply with SEC mandates, reflecting a strategic move toward gaining early approval.

The amended filing by Grayscale clarified that authorized participants in the proposed ETF would be limited to cash transactions for buying and redeeming shares.

However, the names of these participants were conspicuously absent from the documentation, a detail that Balchunas pointed out as being sought by the SEC. He expressed surprise over the omission, given that Grayscale had previously indicated confidence in having such participants.

Previously announced APs

The update follows the Dec. 29 reports that seven companies, including Fidelity Investments, WisdomTree, and Invesco Galaxy, have filed updated Form S-1 applications for launching the first U.S. Bitcoin ETF products.

These companies have included details of their authorized participants, with Invesco Galaxy choosing Virtu Financial and JP Morgan, while WisdomTree and  Fidelity opted for Jane Street Capital. APs play a crucial role in ETFs as they are responsible for creating and redeeming shares of the fund.

Grayscale had previously announced in June 2022 its intention to list Jane Street and Virtu Financial as its authorized participants while converting its Grayscale Bitcoin Trust into an ETF.

Balchunas further commented on the lack of clarity from Grayscale and compared it with other firms like BlackRock and Fidelity, which have provided these details in their filings.

The situation is further complicated by the recent resignation of Barry Silbert as the CEO of Grayscale’s parent company, Digital Currency Group, from Grayscale’s board of directors.

The industry is now looking forward to the SEC’s decision, expected by Jan. 10, on the latest filings from prospective Bitcoin ETF issuers. However, there are also rumors claiming the regulator could green-light the applications much sooner — by the end of the first week of 2024.