Grayscale Surrenders To SEC's Preferred Creation/Redemption Model, Submits Amended Bitcoin ETF Application Following Silbert's Resignation

Grayscale Investments – a digital currency asset management company and a subsidiary of Digital Currency Group (DCG) – has caved in to the U.S. Securities and Commission's preferred creation and redemption model on Bitcoin exchange-traded fund (ETF), according to the latest amended proposal it submitted to the regulator after announcing the resignation of Barry Silbert from its board of directors.

As the deadline for the SEC's decision on the spot Bitcoin ETF applications of some Wall Street giants' closes in, Grayscale Investments submitted another amended proposal, this time, stating that its Bitcoin ETF will use the cash creation and redemption model.

Like BlackRock and ARK, Grayscale also initially said it would use the in-kind creation and redemption model on its spot Bitcoin ETF. But as Wall Street giants ironed out details with the regulator – probably looking to be a part of the first wave of applications to be approved by the commission in the early part of January – almost all of them have surrendered.

Grayscale Investments' latest move was flagged by Bloomberg Intelligence ETF analysts Tuesday, with James Seyffart saying the crypto asset management company was "bending the knee."

"Grayscale finally surrendering to cash-only creations, was a big holdout. Pretty sure they have an AP agreement (a crucial last step) so that would check all the boxes," analyst Eric Balchunas commented.

Finance lawyer Scott Johnsson said that "Grayscale's amended S-3 gives a nice little background on the key sticking point for in-kind creation/redemption."

"The SEC promulgated rulemaking for digital asset safekeeping. Despite the fact that BDs and exchanges apparently believe they could comply with the rule and offer in-kind, the SEC will refuse to approve amendments to exchange rules that would allow this because they're not convinced that it is possible to comply with their rules," Johnsson added.

The amended spot Bitcoin ETF from Grayscale came following the resignation of Silbert, the CEO of its parent company DCG, who will step down from his post as the chairman of Grayscale's board of directors on Jan. 1.

While Grayscale's 8-K filing with the SEC disclosed that Silbert's post on the board will be filled by Mark Shifke, the current financial officer of DCG, it did not reveal the reason behind the internal restructuring. It, however, mentioned that Matthew Kummell and Edward McGee will also join the board.

Bitcoin, the world's oldest crypto asset, was trading in the red zone at $42,441.32, with a 24-hour trading volume up by 13.75% at $27,587,699,785 as of 3:19 a.m. ET on Wednesday. The latest price action represents a 0.76% drop in its value in the past 24 hours and a 0.84% loss over the past seven days.

Data from CoinMarketCap shows that the current circulating supply of Bitcoin stands at 19,582,000 BTC and its market cap is at $831,387,181,335.