Valkyrie Wants to Take Over Grayscale’s Bitcoin Trust Trust

Valkyrie Investments has laid out a proposal to become the new sponsor and manager of Grayscale’s troubled bitcoin trust (GBTC) and fix its large discount.Author:NamciosPublish date:Dec 30, 2022Valkyrie Investments has laid out a proposal to become the new sponsor and manager of Grayscale’s troubled bitcoin trust (GBTC) and fix its large discount.Valkyrie Investments has laid out a proposal to take up the reins of troubled bitcoin trust GBTC. In a statement posted on the company’s website, Steven McClurg (co-founder of Valkyrie) stated that Grayscale had played an important role in the growth and development of the bitcoin ecosystem. He also praised the team’s work. “But, given recent events involving Grayscale, its family of affiliated businesses, it is time to make a change. Valkyrie is the best company for managing GBTC so that its investors are treated fairly. McClurg stated to Bitcoin Magazine that the proposal would allow current GBTC shareholders vote via proxy. If the shareholders choose Valkyrie, Valkyrie will become the sponsor. However, the process is not as simple as it seems. According to a Bloomberg report, Grayscale filings show that shareholders have limited voting rights and no participation in the management or control the trust. A vote of at least 50% of the shares is required to amend the trust agreement. This will ensure that shareholders do not have any materially adverse effects. McClurg explained that Valkyrie is aware and has prepared for these issues to Bitcoin Magazine. Although he declined to give details about the plan, he said that it wouldn’t be their first attempt at achieving this goal. McClurg has the details for what to do after a takeover. In the event that GBTC becomes its manager and sponsor, Valkyrie would “immediately file Reg M exemption,” explained the executive. Grayscale CEO Michael Sonnenshein explained to Yahoo Finance earlier this month, that the trust’s inability to allow redemptions was due to a U.S Securities and Exchange Commission (SEC), shutdown in 2014. The SEC found that redemptions of GBTC were in violation of Reg M. According FINRA, Regulation M is designed to prevent manipulations by individuals with an interest. It also prohibits conduct that could artificially affect the market for offered securities. McClurg stated that if approved by the SEC, the exemption would allow us redeem shares at par value for shareholders who wish to redeem. This would allegedly reduce GBTC’s biggest problem, a 47% discount on its shares compared with the assets it holds. “Redemptions usually cause a discount narrow due to market makers’ ability to arbitrage,” Valkyrie’s executive said. McClurg stated to Bitcoin Magazine that Grayscale could do this without Reg M exemption. The current manager of GBTC is seeking to convert the trust into a spot-bitcoin exchange-traded fund. This would eliminate the discount due to the ETF’s ability to create and redeem shares on demand. It even sued the SEC, claiming that the regulator allowed futures-based products to be listed and didn’t have grounds to deny similar spot offerings. This could explain why the firm is reluctant to apply for Reg M exemption. An eventual exemption from SEC could reduce the discount by nearly zero and decrease its leverage for the ETF movement. However, it is not clear if this is true. If GBTC’s manager turned Valkyrie, Valkyrie would still pursue conversion. “We would still attempt a conversion, but would work with regulators for an orderly conversion on their time,” McClurg said.Find more details of Valkyrie’s proposal here.Tagsterms:GrayscaleValkyrie InvestmentsGbtcValkyriegrayscale investmentsGrayscale Bitcoin Trust

 

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