Grayscale Puts Trust to the Test by Pursuing SEC Registration

On Nov. 19, Grayscale Investments, a subsidiary of Digital Currency Group and the world's largest digital asset manager, filed a voluntary registration statement on Form 10 with the United States Securities and Exchange Commission on behalf of its Grayscale Bitcoin Trust.

If successful, the move would result in the trust acquiring the status of an SEC reporting company, the first cryptocurrency investment instrument to do so.

What would the regulator's approval of the form mean for Grayscale Bitcoin Trust and the wider crypto industry?

How Bitcoin trusts workAn investment trust is a company that owns a fixed amount of a certain asset and issues contracts representing shares of its ownership.

Each share of Grayscale Bitcoin Trust currently represents a little less than 0.001 BTC, with an annual fee of 2%. The share of ownership by a contract slowly decreases over time.

Grayscale Bitcoin Trust shares are publicly traded on the over-the counter market OTCQX. In contrast with exchanges, such decentralized marketplaces normally host stocks of smaller companies and enforce less stringent reporting requirements.

While investors are currently required to hold their private placement shares for at least one year, this period would be reduced to six months if the trust's SEC registration is approved.

"If Grayscale reached reporting company status, it would increase transparency for investors and may encourage more people to invest in the fund. More investors means more liquidity for shareholders, which is a significant benefit. For certain, those investors who are currently restricted from investing in non-SEC regulated reporting companies, would be able to invest."

"If its Form 10 filing is approved and it becomes an SEC registered reporting company, Grayscale's Bitcoin Trust will continue its incremental maturation into a mainstream investment vehicle with the oversight and heightened reporting requirements that come with that. However, I wouldn't expect a massive influx of new funds or listing on new exchanges, but continued, steady growth."

"It's not a massive gamechanger. Other players might be interested in replicating it, but from a logistical standpoint - including quarterly reports to the SEC, auditing, accounting, and heavy legal and financial oversight - it's expensive and labor-intensive. It's a very high barrier for new entrants to achieve what Grayscale is doing."