1 00:00:00,080 --> 00:00:03,520 Speaker 1: We are joined now by Michael Sunensheine, a Grayscale CEO, 2 00:00:03,600 --> 00:00:06,600 Speaker 1: and Bloomberg externally Bastik also joining us as well. Michael, 3 00:00:06,640 --> 00:00:07,400 Speaker 1: it's a real pleasure. 4 00:00:07,480 --> 00:00:09,000 Speaker 2: This is a big day for you. Yesterday. 5 00:00:10,200 --> 00:00:13,200 Speaker 1: What happens now after the US Court sort of gave 6 00:00:13,240 --> 00:00:15,960 Speaker 1: you some runway to be able to launch a spot 7 00:00:15,960 --> 00:00:17,840 Speaker 1: bitcoin ETF, what do you do now? 8 00:00:18,160 --> 00:00:20,000 Speaker 3: Yeah, so thank you so much for having me. Let's 9 00:00:20,000 --> 00:00:23,319 Speaker 3: be clear about yesterday. So, yesterday was the culmination of 10 00:00:23,360 --> 00:00:27,160 Speaker 3: more than a year worth of litigation. The SEC denied 11 00:00:27,200 --> 00:00:30,880 Speaker 3: gbtc's conversion to an ETF. We immediately filed the lawsuit. 12 00:00:31,240 --> 00:00:33,959 Speaker 3: Fourteen months later, Now we finally got a decision from 13 00:00:34,040 --> 00:00:37,800 Speaker 3: the DC Circuit and a panel of three judges unanimously 14 00:00:37,880 --> 00:00:41,080 Speaker 3: voted and agreed with gray Scale, and that actually vacates 15 00:00:41,120 --> 00:00:44,760 Speaker 3: the SEC denial order. Huge win for gray Scale, huge 16 00:00:44,800 --> 00:00:47,640 Speaker 3: win for our investors, and really the crypto and investment 17 00:00:47,640 --> 00:00:48,600 Speaker 3: community is as a whole. 18 00:00:48,800 --> 00:00:50,800 Speaker 4: There's a process here to the point that you're making, 19 00:00:50,920 --> 00:00:53,519 Speaker 4: and there is a chance that the SEC looks to 20 00:00:53,880 --> 00:00:57,840 Speaker 4: broaden this out, potentially fight the decision, bringing this in 21 00:00:57,840 --> 00:01:01,640 Speaker 4: front of a larger array of judges, and so if 22 00:01:01,640 --> 00:01:04,360 Speaker 4: you're thinking about that potential process ahead. Do you have 23 00:01:04,400 --> 00:01:07,959 Speaker 4: any concerns that the race to bring an ATF to 24 00:01:08,200 --> 00:01:10,800 Speaker 4: the market will leave you behind? 25 00:01:11,280 --> 00:01:14,120 Speaker 3: Well, So today is day one of a forty five 26 00:01:14,200 --> 00:01:17,440 Speaker 3: day period during which the SEC has the ability to 27 00:01:17,480 --> 00:01:21,200 Speaker 3: request a rehearing. Ultimately, at the end of that forty 28 00:01:21,240 --> 00:01:24,119 Speaker 3: five day process, you could expect a final mandate from 29 00:01:24,120 --> 00:01:27,160 Speaker 3: the court with operational next steps. Now, of course, in 30 00:01:27,200 --> 00:01:30,160 Speaker 3: the interim, our attorneys are going to be working proactively 31 00:01:30,240 --> 00:01:32,840 Speaker 3: with the SEC to try and make this conversion as 32 00:01:32,959 --> 00:01:36,480 Speaker 3: expeditious as possible, But we really do need to ensure 33 00:01:36,560 --> 00:01:39,560 Speaker 3: during this period we're adhering to the federal rules of 34 00:01:39,600 --> 00:01:40,520 Speaker 3: the appellate court. 35 00:01:40,720 --> 00:01:43,640 Speaker 4: Do you need to refile for an ETF? And if 36 00:01:43,640 --> 00:01:46,360 Speaker 4: you do need to refile or amend, are there certain 37 00:01:46,440 --> 00:01:49,600 Speaker 4: things that you would add, such as a surveillance sharing agreement? 38 00:01:49,640 --> 00:01:51,920 Speaker 4: Do you worry that the ones that already have one 39 00:01:52,280 --> 00:01:54,400 Speaker 4: have a competitive advantage to your filing? 40 00:01:54,880 --> 00:01:58,320 Speaker 3: Well, So, the operational next steps on anything that Grayscale 41 00:01:58,320 --> 00:02:00,000 Speaker 3: Willer won't have to do will be contained in that 42 00:02:00,120 --> 00:02:02,480 Speaker 3: final mandate that comes out of the court. But one 43 00:02:02,520 --> 00:02:04,520 Speaker 3: of the interesting things that we actually got from the 44 00:02:04,520 --> 00:02:07,720 Speaker 3: court in yesterday's decision was that the court agreed with 45 00:02:07,800 --> 00:02:10,639 Speaker 3: us that the arguments we've been putting forward all along 46 00:02:10,680 --> 00:02:14,680 Speaker 3: throughout this process or such that the SEC already has 47 00:02:14,760 --> 00:02:18,840 Speaker 3: the tools it needs to approve spot bitcoin products like GBTC, 48 00:02:19,120 --> 00:02:22,359 Speaker 3: that there is sufficient surveillance between the CME where Bitcoin 49 00:02:22,440 --> 00:02:25,480 Speaker 3: Future is trade in national securities exchanges like the New 50 00:02:25,520 --> 00:02:28,440 Speaker 3: York Stock Exchange where we intend to list GBTC as 51 00:02:28,480 --> 00:02:31,799 Speaker 3: an ETF. So there really shouldn't be any further grounds 52 00:02:31,919 --> 00:02:34,799 Speaker 3: like the SEC has been relying on to continue denying 53 00:02:34,800 --> 00:02:36,480 Speaker 3: these types of products from coming to market. 54 00:02:37,320 --> 00:02:39,799 Speaker 2: Michael, you're very optimistic. Danny here by the way, and London, 55 00:02:39,840 --> 00:02:41,959 Speaker 2: great to speak with you. It makes complete sense that 56 00:02:42,000 --> 00:02:45,560 Speaker 2: you're optimistic and in a good mood. But do you 57 00:02:45,600 --> 00:02:47,720 Speaker 2: have a nagging voice at the back of your head 58 00:02:47,840 --> 00:02:50,960 Speaker 2: that something might go wrong? What are you most afraid 59 00:02:51,000 --> 00:02:53,679 Speaker 2: of that could kind of undo some of the progress 60 00:02:53,680 --> 00:02:55,280 Speaker 2: that we saw in yesterday's decision. 61 00:02:55,880 --> 00:02:58,320 Speaker 3: Well, I think we're really at a pivotal moment here 62 00:02:58,360 --> 00:03:01,520 Speaker 3: for crypto. Certainly a lot of investors have been voicing 63 00:03:01,520 --> 00:03:05,320 Speaker 3: to us increased optimism both around the recent Ripple victory 64 00:03:05,480 --> 00:03:08,680 Speaker 3: now obviously the greyscale victory in court yesterday as well 65 00:03:08,720 --> 00:03:11,080 Speaker 3: as what they're seeing taking place in Washington right you 66 00:03:11,160 --> 00:03:15,079 Speaker 3: now have draft legislation that's passing through Congress, and we're 67 00:03:15,120 --> 00:03:19,280 Speaker 3: really optimistic that there will be greater regulatory clarity for 68 00:03:19,560 --> 00:03:22,320 Speaker 3: investors through some of these types of actions. And I 69 00:03:22,320 --> 00:03:24,200 Speaker 3: think if we take an even larger step back and 70 00:03:24,200 --> 00:03:26,600 Speaker 3: look at the broader landscape, crypto has been one of 71 00:03:26,600 --> 00:03:29,680 Speaker 3: the best performing assets year to date, and coming out 72 00:03:29,680 --> 00:03:32,160 Speaker 3: of this most recent crypto winter, what we're hearing and 73 00:03:32,200 --> 00:03:34,720 Speaker 3: what we're experiencing is that investors know that crypto as 74 00:03:34,720 --> 00:03:36,920 Speaker 3: an asset class is most certainly here to stay. 75 00:03:37,280 --> 00:03:38,880 Speaker 1: Can we come out to refiling for a second? 76 00:03:39,040 --> 00:03:39,280 Speaker 2: Sure? 77 00:03:39,280 --> 00:03:40,440 Speaker 1: So do you have to refile? 78 00:03:40,920 --> 00:03:44,520 Speaker 3: We will have to see upon the final operational procedures 79 00:03:44,560 --> 00:03:47,520 Speaker 3: that come through that final mandate that the court will issue. 80 00:03:47,680 --> 00:03:49,200 Speaker 1: So you don't know, but you may. 81 00:03:49,600 --> 00:03:52,080 Speaker 3: We don't know what the final opinion will say until 82 00:03:52,120 --> 00:03:54,720 Speaker 3: we reach the end of that period, correct, is there? 83 00:03:54,720 --> 00:03:57,200 Speaker 1: I've been reading us stuff from yesterday too that you know, 84 00:03:57,320 --> 00:03:59,480 Speaker 1: you may have won this battle but then lose the war, 85 00:03:59,520 --> 00:04:01,440 Speaker 1: and that there's a bunch of other competitors now, so 86 00:04:01,480 --> 00:04:02,880 Speaker 1: now you're not gonna be the only horse in town. 87 00:04:03,200 --> 00:04:06,200 Speaker 3: Yes, So this is a topic we've talked about before, Ladies. 88 00:04:06,360 --> 00:04:10,160 Speaker 3: It's really a world in which there are multiple spot products. 89 00:04:10,200 --> 00:04:12,200 Speaker 3: Is a world that Greyscale has long been ready for. 90 00:04:12,280 --> 00:04:14,920 Speaker 3: There are multiple bitcoin futures products. We believe that there 91 00:04:14,920 --> 00:04:16,599 Speaker 3: will be a world in which there are multiple spot 92 00:04:16,600 --> 00:04:20,520 Speaker 3: bitcoin products. That being said, we want investors to have choice, 93 00:04:20,720 --> 00:04:22,680 Speaker 3: and some of the things that we do think investors 94 00:04:22,720 --> 00:04:25,320 Speaker 3: will look to when they are making those allocation decisions 95 00:04:25,360 --> 00:04:27,800 Speaker 3: are the size of the fund, the liquidity of the fund, 96 00:04:27,880 --> 00:04:30,080 Speaker 3: the track record of the fund. Right, let's not forget 97 00:04:30,080 --> 00:04:32,760 Speaker 3: that GBTC is the largest bitcoin fund in the world. 98 00:04:33,040 --> 00:04:37,120 Speaker 3: It's owned by millions and millions of investors, it has 99 00:04:37,279 --> 00:04:40,520 Speaker 3: three plus percent of the outstanding bitcoin supply, and really 100 00:04:40,560 --> 00:04:45,120 Speaker 3: now has almost a ten year track record of operational success. Right, 101 00:04:45,160 --> 00:04:47,200 Speaker 3: Whereas a lot of the other products coming to market 102 00:04:47,320 --> 00:04:51,760 Speaker 3: are really making use of gbtc's operations, disclosures, reporting, and 103 00:04:51,839 --> 00:04:54,800 Speaker 3: GBTC is really paving the way to broaden out that market. 104 00:04:54,880 --> 00:04:57,640 Speaker 4: There's another massive market question here, and it's not just 105 00:04:57,680 --> 00:05:00,840 Speaker 4: about the pace and time. It's about the structure and 106 00:05:00,880 --> 00:05:04,520 Speaker 4: the fees. Because if you look at Blackrock investcal fidelity. 107 00:05:04,560 --> 00:05:07,320 Speaker 4: These are asset managers with a history of coming in 108 00:05:07,400 --> 00:05:09,480 Speaker 4: low And if you look at the fees that you 109 00:05:09,480 --> 00:05:13,080 Speaker 4: have offered and really has made a very profitable entity 110 00:05:13,160 --> 00:05:16,560 Speaker 4: for a digital currency group and gray scale, how much 111 00:05:16,680 --> 00:05:20,839 Speaker 4: lower exactly can fees get for the grayscale product in 112 00:05:20,880 --> 00:05:21,960 Speaker 4: the form of an ETF. 113 00:05:22,279 --> 00:05:24,880 Speaker 3: Well, what I've committed to historically, and we'll say again 114 00:05:24,920 --> 00:05:27,640 Speaker 3: to you today, is we are committed to lowering fees 115 00:05:27,839 --> 00:05:31,279 Speaker 3: when GBTC converts to an ETF. We'll obviously have to 116 00:05:31,320 --> 00:05:33,440 Speaker 3: come back on and talk to you about what the 117 00:05:33,480 --> 00:05:35,400 Speaker 3: fees are when that conversion actually happens. 118 00:05:36,360 --> 00:05:40,200 Speaker 4: So the other strangeness here is the discount that the 119 00:05:40,240 --> 00:05:43,200 Speaker 4: GBTC is currently trading at. You had gone from twenty 120 00:05:43,200 --> 00:05:46,279 Speaker 4: four yesterday to fifteen below dead asset value back to 121 00:05:46,360 --> 00:05:49,880 Speaker 4: twenty Can you answer to this market volatility here and 122 00:05:49,960 --> 00:05:52,840 Speaker 4: the uncertainty that investors are grappling with as you head 123 00:05:52,880 --> 00:05:53,760 Speaker 4: towards this process. 124 00:05:54,120 --> 00:05:56,560 Speaker 3: Well, there's a couple of things in that dynamic. So 125 00:05:56,720 --> 00:06:00,719 Speaker 3: number one, there certainly was increased trading volume yesterday GBTC, 126 00:06:01,040 --> 00:06:04,159 Speaker 3: a lot of excitement and enthusiasm based on the victory 127 00:06:04,320 --> 00:06:08,400 Speaker 3: that GBTC shareholders had in the court yesterday. Now, as 128 00:06:08,440 --> 00:06:12,320 Speaker 3: we eventually approach an ETF, if you'd expect that eventually 129 00:06:12,360 --> 00:06:15,440 Speaker 3: there will be an arbitrage mechanism through the ETF that 130 00:06:15,480 --> 00:06:18,760 Speaker 3: will allow for any premiums or discounts to be eliminated. 131 00:06:19,400 --> 00:06:23,240 Speaker 3: That's a really, really important function of why ETFs serve 132 00:06:23,320 --> 00:06:25,520 Speaker 3: in the capacity that they do, and it's really the 133 00:06:25,560 --> 00:06:28,960 Speaker 3: core of what we've been fighting for throughout this entire lawsuit, 134 00:06:29,040 --> 00:06:32,000 Speaker 3: right is to ensure that the optimal investment structure is 135 00:06:32,040 --> 00:06:35,440 Speaker 3: there for investors and we do eliminate any premiums or discounts. 136 00:06:36,040 --> 00:06:38,240 Speaker 2: Michael, have you heard anything from the SEC over the 137 00:06:38,279 --> 00:06:41,240 Speaker 2: past twenty four hours, any updated communications or questions. 138 00:06:41,880 --> 00:06:45,039 Speaker 3: We have not heard anything from the SEC, only just 139 00:06:45,040 --> 00:06:49,479 Speaker 3: from public reporting. We've seen certainly that the SEC is 140 00:06:49,520 --> 00:06:52,080 Speaker 3: reviewing the decision much the same way my team and 141 00:06:52,160 --> 00:06:55,000 Speaker 3: my legal team is reviewing the decision as well. And 142 00:06:55,040 --> 00:06:57,039 Speaker 3: again it is our intention to continue to have a 143 00:06:57,080 --> 00:07:00,440 Speaker 3: proactive and constructive dialogue with the SEC during this forty 144 00:07:00,440 --> 00:07:01,240 Speaker 3: five day period. 145 00:07:02,920 --> 00:07:07,520 Speaker 1: I guess the other question becomes why here versus If 146 00:07:07,600 --> 00:07:11,160 Speaker 1: crypto bitcoin is going to become a hotter topic overseas, right, 147 00:07:11,800 --> 00:07:14,080 Speaker 1: why launch here? Why not go somewhere else a launch. 148 00:07:14,280 --> 00:07:17,040 Speaker 3: Well, this is the center of the financial markets and 149 00:07:17,160 --> 00:07:17,960 Speaker 3: capital formation. 150 00:07:18,080 --> 00:07:20,360 Speaker 1: But clearly the US government does not like crypto. 151 00:07:20,720 --> 00:07:24,480 Speaker 3: Well, you know, from my standpoint, Greyscale now coming up 152 00:07:24,480 --> 00:07:28,960 Speaker 3: on ten years of operational history, you know, we purposely 153 00:07:29,000 --> 00:07:31,640 Speaker 3: decided to set up shop in the US, make use 154 00:07:31,680 --> 00:07:34,960 Speaker 3: of existing rules and regulations, and it's our intention to 155 00:07:35,000 --> 00:07:38,400 Speaker 3: continue to do so right enabling investors to access this 156 00:07:38,480 --> 00:07:42,040 Speaker 3: innovative asset class, but in a way that feels traditional, familiar, 157 00:07:42,080 --> 00:07:45,200 Speaker 3: and again within those regulatory you know, constraints to say 158 00:07:45,280 --> 00:07:46,280 Speaker 3: that they're often used to. 159 00:07:46,640 --> 00:07:49,760 Speaker 4: We were talking about the potential to either refile or amend. 160 00:07:49,800 --> 00:07:52,440 Speaker 4: We were talking about the SEC's frustrations with crypto and 161 00:07:52,480 --> 00:07:54,920 Speaker 4: fight against a lot of the parts of the crypto industry. 162 00:07:55,440 --> 00:07:58,680 Speaker 4: Are you specifically addressing some of the SEC's concerns when 163 00:07:58,720 --> 00:08:01,520 Speaker 4: it comes to their concerns around urk of manipulation, investor 164 00:08:01,560 --> 00:08:05,360 Speaker 4: protection around retail investors and are there any changes that 165 00:08:05,440 --> 00:08:09,240 Speaker 4: need to be made before you head into a new 166 00:08:09,400 --> 00:08:10,320 Speaker 4: relationship with them. 167 00:08:10,640 --> 00:08:12,960 Speaker 3: Well, I think we always have and will continue to 168 00:08:13,000 --> 00:08:16,080 Speaker 3: serve in a capacity that's educational with the SEC. This 169 00:08:16,200 --> 00:08:18,760 Speaker 3: is an asset class that continues to evolve very rapidly, 170 00:08:18,800 --> 00:08:21,840 Speaker 3: and we feel a tremendous responsibility to be serving in 171 00:08:21,880 --> 00:08:26,520 Speaker 3: that capacity. Specifically though Shanali to manipulation, fraud, things of 172 00:08:26,560 --> 00:08:29,240 Speaker 3: that nature. If you look closely at yesterday's opinion that 173 00:08:29,280 --> 00:08:31,880 Speaker 3: the Court issued, the Court agreed with us that the 174 00:08:31,920 --> 00:08:35,400 Speaker 3: SEC did not come up with substantive reasoning as to 175 00:08:35,440 --> 00:08:38,560 Speaker 3: how to explain the difference between futures and spot and 176 00:08:38,600 --> 00:08:41,199 Speaker 3: the fact that these mechanisms that we believe are already 177 00:08:41,200 --> 00:08:44,000 Speaker 3: in placed to detect things like fraud and manipulation in 178 00:08:44,040 --> 00:08:45,960 Speaker 3: the bitcoin market are already present. 179 00:08:47,320 --> 00:08:50,160 Speaker 2: Michael, you mentioned earlier in this conversation that you had 180 00:08:50,200 --> 00:08:52,760 Speaker 2: some hope that that Congress would take action when it 181 00:08:52,760 --> 00:08:55,400 Speaker 2: comes to regulation. Perhaps there's more appetite for them to 182 00:08:55,480 --> 00:08:58,480 Speaker 2: approve and to welcome such products. You said, you haven't 183 00:08:58,480 --> 00:09:01,240 Speaker 2: heard from the SEC. Have you heard from Congress? What 184 00:09:01,320 --> 00:09:03,520 Speaker 2: sort of noise are you hearing around Capitol Hill? 185 00:09:03,920 --> 00:09:06,920 Speaker 3: So we are certainly very engaged with both sides of 186 00:09:06,960 --> 00:09:10,199 Speaker 3: the aisle in DC. There is no question now that 187 00:09:10,520 --> 00:09:14,640 Speaker 3: crypto has become actually a non partisan issue. Right We're 188 00:09:14,679 --> 00:09:19,079 Speaker 3: realizing that so many of our legislators recognize that their 189 00:09:19,160 --> 00:09:22,640 Speaker 3: underlying constituents are involved in crypto, are increasingly going to 190 00:09:22,640 --> 00:09:24,960 Speaker 3: be involved in crypto, and they want to ensure that 191 00:09:25,000 --> 00:09:29,160 Speaker 3: they're approaching legislation in an appropriate way that protects their 192 00:09:29,240 --> 00:09:33,920 Speaker 3: underlying constituents. I am optimistic that this upcoming you know, 193 00:09:34,000 --> 00:09:37,920 Speaker 3: Congress can actually move some legislation forward. And again, I 194 00:09:37,960 --> 00:09:41,120 Speaker 3: do think it's really a pivotal time for US and 195 00:09:41,280 --> 00:09:44,439 Speaker 3: other stal warts within the crypto space to be educating 196 00:09:44,480 --> 00:09:47,760 Speaker 3: our politicians about crypto so that they actually are looking 197 00:09:47,760 --> 00:09:50,600 Speaker 3: at legislation through a very you know, knowledgeable lens. 198 00:09:50,960 --> 00:09:52,560 Speaker 4: I'm going to push you just one more time on 199 00:09:52,600 --> 00:09:53,679 Speaker 4: the fees here, Michael, Oh. 200 00:09:53,800 --> 00:09:55,480 Speaker 3: Of course you aresinality well. 201 00:09:55,520 --> 00:09:58,040 Speaker 4: The reason being is this is a matter of competitiveness 202 00:09:58,120 --> 00:10:00,280 Speaker 4: when we come to this market. It is also to 203 00:10:00,320 --> 00:10:03,000 Speaker 4: determine how much retail investors are going to really pay 204 00:10:03,280 --> 00:10:05,199 Speaker 4: for a product that has been more expensive than other 205 00:10:05,200 --> 00:10:07,680 Speaker 4: ETFs in the past. Give us a roadmap here on 206 00:10:07,720 --> 00:10:09,719 Speaker 4: how you're thinking about it, because you've had years to 207 00:10:09,720 --> 00:10:10,320 Speaker 4: think about it. 208 00:10:11,080 --> 00:10:14,920 Speaker 3: We have, and when GBTC converts to an ETF, we 209 00:10:15,000 --> 00:10:18,040 Speaker 3: will lower the fee. You said that it's been more 210 00:10:18,080 --> 00:10:22,360 Speaker 3: expensive than other ETFs. Notably, GBTC is not an ETF today. Right, 211 00:10:22,400 --> 00:10:25,240 Speaker 3: And so when GBTC converts to an ETF and it 212 00:10:25,280 --> 00:10:28,320 Speaker 3: becomes in that product structure, and it perhaps is in 213 00:10:28,360 --> 00:10:31,400 Speaker 3: an environment with other competing products, there will be other 214 00:10:31,440 --> 00:10:34,479 Speaker 3: factors for us to consider there as well. 215 00:10:34,559 --> 00:10:36,439 Speaker 2: Michael, I'm afraid that's all we have time for. Really 216 00:10:36,480 --> 00:10:38,760 Speaker 2: appreciate you coming on join us again. Tell us about 217 00:10:38,800 --> 00:10:41,360 Speaker 2: the next step, tell us about those fees. Michael Sunensheine, 218 00:10:41,480 --> 00:10:44,360 Speaker 2: Gray Scale CEO, and Bloomberg Shan Alibassic thank you so 219 00:10:44,440 --> 00:10:45,400 Speaker 2: much for joining us.