In light of false claims circulating regarding adverse tax effects, Grayscale is assessing the potential tax ramifications related to spot Bitcoin exchange-traded funds (ETF).Grayscale clarified in a series of posts on X (formerly Twitter) that retail investors in the Grayscale Bitcoin Trust (GBTC) shouldn’t worry about tax ramifications when the fund sells Bitcoin to raise money to pay for share redemptions.
“As we work to obtain the appropriate regulatory approvals to uplist $GBTC to NYSE Arca, we’re considering the potential tax implications for spot Bitcoin ETFs needing to sell $BTC holdings for cash to fulfill share redemptions. Here’s why we’re talking about this now. (1/7) — Grayscale (@Grayscale) December 15, 2023.”
According to Grayscale, this is because the GBTC is set up as a grantor trust, which implies that for income and tax reasons, the organization creating the trust is the owner of the assets, in this case, the underlying Bitcoin.
“Cash redemptions of grantor trusts are not taxable events for non-redeeming shareholders like retail investors,” the post stated while explaining its difference from mutual funds.
“Unlike mutual funds and many other ETFs, substantially all spot commodity ETFs (e.g., gold) are structured to be grantor trusts for tax purposes. We take the position that GBTC is properly treated as a grantor trust.”
This comes after rumors circulated that Grayscale and the US Securities and Exchange Commission (SEC) met once more to talk more about Grayscale’s spot Bitcoin ETF application.Just one day after Fidelity executives came before the SEC, Grayscale and Franklin Templeton met with the agency to discuss their applications, as Cointelegraph revealed on December 8.
However, the SEC delayed its decision on Grayscale’s spot Ether ETF proposal to January 24, 2024, just days earlier on December 5.