In a recent filing to the U.S. Securities and Exchange Commission (SEC), Grayscale Investments announced the departure of Barry Silbert as chairman, marking another setback for the Digital Currency Group (DCG) founder.
Silbert, along with DCG president Mark Murphy, resigned from their positions on Grayscale’s board of directors, according to the filing. Effective January 1, 2024, Mark Shifke, DCG’s chief financial officer, will take over as Grayscale chairman. Additionally, two new board members have been appointed: Matt Kummell, DCG’s senior VP of operations, and Edward McGee, Grayscale CFO.
While Silbert has not publicly commented on the reasons behind his resignation, this development coincided with Grayscale filing an amended version of its application to convert Grayscale Bitcoin Trust (GBTC) into a spot-based exchange-traded fund (ETF).
The filings followed a series of recent meetings between Grayscale and SEC representatives, prompting speculation about the SEC’s influence in reshaping Grayscale’s leadership. Silbert’s reputation faced challenges, particularly in October when the New York Attorney General charged him, DCG, Genesis Global Capital, and Gemini exchange with defrauding investors of $1.1 billion. The charges stemmed from the collapse of the ‘crypto’ hedge fund Three Arrows Capital in early 2022, to which Genesis had lent significant funds.
Amid financial difficulties and ongoing legal issues, Grayscale has been criticized for its Grayscale Bitcoin Trust (GBTC) not honoring redemption requests while still charging annual management fees of 2%, contributing to concerns about the sustainability of DCG’s overall revenue.
In response to the changing landscape, Grayscale’s amended ETF application includes “cash creation” language, restricting the handling of BTC involved in an ETF to the issuer, in this case, DCG. This model is considered more cumbersome and may create taxable events, but it aligns with the SEC’s push to limit the handling of BTC by market-makers and unregistered broker-dealers.
The SEC has a January 10 deadline to respond to the ETF application by ARK 21Shares, and market sentiment suggests the possibility of simultaneous approvals for multiple ETF applications.
While expectations of ETF approvals have driven recent increases in token prices, some believe that the approvals are already priced into the market. The approval could lead to a “sell on the news” scenario, causing a short-term decline in BTC’s value, according to Cathie Wood of ARK Invest. However, Wood anticipates institutional investors will still engage with crypto ETFs despite limited retail interest.
Despite the challenging environment, Grayscale’s financial report indicates a 42% increase in digital asset balances from August 31, 2022, to August 31, 2023, showcasing the company’s ability to navigate the evolving digital currency market.
