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What does Barry Silbert’s departure mean for Grayscale’s spot Bitcoin ETF application?

Barry Silbert has resigned from Grayscale just weeks before the SEC is set approve or reject the company’s application to convert GBTC into a spot Bitcoin ETF.

Barry Silbert, CEO of Grayscale’s parent company, DCG, has resigned from his position as chairman of the board at Grayscale Investments, a December 26 8-K filing with the United States Securities and Exchange Commission (SEC) reveals.

Silbert will be succeeded by Mark Shifke, DCG’s chief financial officer. The resignation coincides with Grayscale’s efforts to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin Exchange-Traded Fund (ETF), which is currently awaiting approval from the SEC.

Investors and analysts speculate that Silbert’s departure spells good news for Grayscale’s application, based on the belief that Grayscale is distancing the company from the ongoing investigations faced by its parent company, Digital Currency Group (DCG).

DCG is currently under investigation by both the SEC and Department of Justice (DOJ) for allegations relating to internal financial dealings between DCG and its subsidiary Genesis Global Capital, a crypto lending firm.

In July, crypto exchange Gemini filed a lawsuit against DCG and Silbert personally, with co-founder Cameron Winklevoss publicly accusing Silbert of being “directly and personally” involved in perpetrating fraud against creditors.

The companies reached an agreement in August, but in October, New York’s Attorney General sued DCG, Genesis, Gemini, Silbert, and former Genesis CEO Soichiro Moro, for allegedly defrauding over 200,000 customers.

Silbert’s resignation will be effective from January 1 – approximately one week before the SEC’s deadline to approve or reject the application.

Senior Bloomberg analyst Eric Balchunas believes Silbert’s resignation suggests the company is trying to show the SEC it’s being a “good boy“, worthy of making the first tranche of launches.

Ram Ahluwalia, CEO at Lumida Wealth, went even further and said that the resignation is a “Christmas gift” to Grayscale CEO Michael Sonnenshein, bringing attention to the allegations.

Another positive indicator: cash redemptions

On December 26, Grayscale filed another amended S-3 to convert GBTC into a Bitcoin ETF accepting cash-only redemptions. This means that investors who wish to withdraw from the ETF receive payouts in cash, rather than Bitcoin. This differs from a traditional ETF redemption process where investors might receive the actual underlying asset (in this case, Bitcoin).

While some have criticised cash-only redemptions, arguing that it may increase costs for investors, it’s likely that the change will be more favourable to the SEC, who have already expressed concerns about risk and market manipulation.

James Seyffart, another Bloomberg analyst, commented that the amendment may reflect Grayscale “bending the knee” to win favour with the SEC.

The SEC initially rejected Grayscale’s application, but a court recently ruled that the judgement was “arbitrary and capricious”, ordering the SEC to review its decision.

The potential deadline for the SEC to approve or reject the first spot Bitcoin ETF is January 10, 2024.

Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

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