December 2, 2023

Crypto asset manager Grayscale Investments has announced the launch of Grayscale Funds Trust, a new entity to manage its growing portfolio of funds. Meanwhile, the firm has filed with the U.S. Securities and Exchange Commission (SEC) for three new cryptocurrency-focused ETFs (exchange-traded funds). The proposed ETFs include an Ethereum Futures ETF, a Global Bitcoin Aggregate ETF, and a Privacy ETF.

The launch of the Grayscale Funds Trust signals the firm’s intention to manage several of its publicly traded financial products internally.Global Bitcoin Composite ETF will invest in exchange-traded products related to or supported by it bitcoin, including bitcoin mining companies.Ethereum Futures ETF Aims to Provide Indirect Exposure Ether’s Potential Future Value By tracking a stock’s price. Meanwhile, the Grayscale Privacy ETF intends to invest in companies working on blockchain-based privacy technologies.

Currently, the three ETFs are not publicly available for purchase until the SEC has approved the registration statement associated with Grayscale Funds Trust. The development follows Grayscale’s ongoing conflict with the SEC over its $17 billion asset conversion. Grayscale Bitcoin Trust (GBTC) becomes a spot bitcoin ETF product. Grayscale sues regulators for rejecting its application, saying SEC treats cryptocurrency spot exchanges differently than exchange-traded products futures products.

Despite the SEC Approving Several Bitcoin Futures ETFs, It Has Already Reject all applications for spot bitcoin investment products Fears expose investors to potential fraud and market manipulation.Gray scale extended to ETF businesscombined with its Ongoing legal conflict with the SECpointing to the complexity of terms and agreements between large firms engaged in cryptocurrency-focused investments.

Concerns About Rule Changes

Grayscale CEO Michael Sonnenshein expressed concern that the SEC’s proposed rule changes to protect customers’ cryptocurrency funds could prevent the company from using Coinbase as the sole holder of its $5.4 billion in crypto assets. The SEC’s proposal, which aims to make investment advisors responsible for safeguarding the custody of their client assets, could pose a challenge to centralized exchanges like Coinbase, or any platform that manages client assets through Coinbase.

Currently, Grayscale controls the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE), which collectively hold approximately $5.4 billion in bitcoin and ether. The funds are held entirely by Coinbase through the Coinbase Custody Trust Company, using offline cold storage and unique on-chain addresses to avoid commingling with other customers’ funds.gray scale Rely on professional third-party custodians To protect client assets following the norms of traditional asset managers, Sonnenshein asserts that none of their custodians have experienced loss of client assets.

this SEC’s Proposed Rule Could Seriously Disrupt Grayscale’s Model to store its $5.4 billion in client assets. Sonnenshein warned the SEC against actions that could introduce considerable new costs, risks and burdens without enhanced benefits.

Coinbase also ended by expressing concerns about the proposed rule, arguing that it would not benefit registered investment advisors (RIAs) or their clients and could harm them. SEC’s comment period ends this month, raising questions Grayscale’s relationship with Coinbase and the potential implications this may shed light on.

Disclaimer: This article is for informational purposes only. It does not provide or be intended to be used as legal, tax, investment, financial or other advice.