Grayscale Takes Over Key Role for Bitcoin Trust, Other Products From Genesis

Crypto asset management firm Grayscale Investments, which offers the world’s biggest BTC$106,618.74 trust, is bringing a key administrative role for all of its products in-house through a newly created broker-dealer unit.

The company will now act as the authorized participant for the products through its Grayscale Securities subsidiary, the firm announced Monday. That means it will now be responsible for creating new shares of the trust and selling them to investors. Previously, Grayscale outsourced that role to Genesis Global Trading. (Grayscale, Genesis and CoinDesk all share the same parent company: Digital Currency Group.)

The change “creates efficiency but doesn’t fundamentally change the Grayscale business,” Grayscale CEO Michael Sonnenshein said in an interview. “What it’s doing is bringing a capability in-house to the Grayscale organization while continuing to adhere to any financial rules and regulations.”

Genesis will still handle buying the cryptocurrencies underlying Grayscale’s trusts, and there are currently no plans to add any liquidity providers beyond Genesis, Sonnenshein said.

“The way that we’ve structured all of those kinds of agreements is we can and, at some point, will perhaps access more liquidity providers,” he said. “Today, Genesis remains our sole liquidity provider and we’ve had nothing but a positive relationship with them, going back to 2013, so I can’t see a need to expand.”

He added that the customer experience will not be affected by the authorized participant change. Grayscale offers nearly 20 different products, which either offer investors exposure to a single cryptocurrency like bitcoin or Ethereum’s ether (ETH), or a diversified basket of tokens.

Earlier this year, before the Securities and Exchange Commission (SEC) rejected Grayscale’s application to turn the $2 billion Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund, the company said it had lined up Jane Street and Virtu Financial as authorized participants following a conversion.

Read more: Grayscale Lines Up Jane Street and Virtu as 'Authorized Participants' if GBTC Converts to ETF

Grayscale Securities is recognized as a broker-dealer by both the SEC and Financial Industry Regulatory Authority (FINRA), according to regulatory filings.