Grayscale is seeking to launch a new, smaller fund based on GBTC.
The Grayscale Bitcoin Mini Trust fund would trade under the ticker BTC. A person familiar with the matter told Blockworks that Grayscale had the ticker reserved for a while to build out a suite of products.
The Securities and Exchange Commission will need to approve the fund before it can officially launch.
While an exact fee isn’t clear, the fee for BTC will be lower than GBTC’s 1.5% fee, and would be competitive with the other bitcoin ETF fees, the person said.
GBTC will seed BTC, and a certain percentage of the bitcoins will be allocated to the new fund.
“At Grayscale, we aim to continually provide our investors with compelling, future-forward opportunities to access Bitcoin and the crypto ecosystem. Additional information can be found in Grayscale’s public filings,” a Grayscale spokesperson told Blockworks via email.
Additionally, the spin-off will not be a taxable event for shareholders meaning that GBTC investors will not pay capital gains, a source close to Grayscale told Blockworks.
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“The Spin-Off is not expected to be a taxable event for GBTC or its shareholders, except to the extent that Bitcoin is (or is treated as having been) sold to fund cash payments with respect to de minimis fractional Shares, if any,” the fund’s S-1 said.
Blockworks previously reported that some investors were caught in a tax web regarding GBTC since some investors may face large tax bills if they tried to move out of GBTC into another bitcoin ETF.
Bloomberg ETF analyst James Seyffart — who also predicted that Grayscale would use the BTC ticker to launch a “cheaper sibling” — said that he wasn’t expecting the asset manager to use a spin-off to launch the fund.
The approach “definitely helps out long-term GBTC holders — particularly the taxable ones who were sorta stuck with potential capital gains tax hits. Not a full solution. But way more helpful than launching a standalone product from scratch,” he said in a post on X.
Smaller fund launches aren’t uncommon in the ETF industry. In 2018, State Street launched the SPDR Gold MiniShares Trust, which was designed to reflect gold’s performance with a lower fee.
Grayscale’s approach is unique, however. The fund looks to be the first to use the spin-off mechanism on a commodities ETF, according to a person familiar.
In a post on X, Seyffart said that the “only situation like this” was the Financial Select Sector SPDR Fund (XLF) spinning REITs into Real Estate Select Sector SPDR (XLRE.) However, the fund just moved the real estate stocks into the other fund, which Seyffart noted, is a different scenario than GBTC moving a percentage of bitcoin into BTC.
Grayscale’s bitcoin ETF has the highest fee of all the bitcoin ETFs currently on the market. The fund has also seen the highest level of outflows of the group. Grayscale converted its bitcoin trust to a bitcoin ETF in January, putting the fund slightly ahead of the rest of the pack.
However, as of last week, the other nine funds have collectively surpassed GBTC in assets under management.