Grayscale, a prominent crypto asset manager, has recently engaged in discussions with the U.S. Securities and Exchange Commission (SEC) regarding the transformation of its Bitcoin trust into a spot Bitcoin exchange-traded fund (ETF). This dialogue was disclosed in a memo from the SEC dated November 20.

The meeting involved Grayscale’s CEO Michael Sonnenshein, legal head Craig Salm, ETF leader Dave LaValle, and four additional executives, along with a team of five representatives from the Davis Polk law firm. The discussions focused on a proposed rule change by NYSE Arca, Inc., which is necessary for the listing and trading of shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E.

Grayscale has recently taken steps to prepare for this transition, as noted in a Bloomberg report by ETF analyst James Seyffart. The firm has entered into a transfer agency and service agreement with BNY Mellon. This partnership involves BNY Mellon acting as the agent for Grayscale’s Bitcoin Trust, overseeing the issuance and redemption of shares, as well as maintaining shareholder accounts.

Seyffart, in a post on X (formerly known as Twitter) dated November 21, pointed out that the SEC’s division of trading and markets, which is responsible for approving or denying Form 19b-4s, was involved in the meeting. These forms are used to notify the SEC about proposed rule changes by self-regulatory organizations.

While Grayscale’s agreement with BNY Mellon is a significant step, Seyffart indicated that this doesn’t necessarily mean the imminent conversion of the GBTC to an ETF. Nate Geraci, president of The ETF Store, in a November 22 X post, suggested that the most important takeaway from Grayscale’s SEC meeting is the reference to GBTC’s “conversion” as an “uplisting.” He noted that this doesn’t imply any problems with the conversion to an ETF format.

Geraci also added that if Grayscale can successfully “uplist GBTC to NYSE Arca on the same day other issuers launch spot BTC ETFs” and actively compete on fees, it has the potential to dominate this ETF category. He highlighted that Grayscale would enter the market with a substantial $20 billion in assets under management, even amidst competition from giants like BlackRock.

In October, Grayscale filed a Form S-3 registration statement with the SEC, signaling its intent to list GBTC shares on the NYSE Arca under the ticker symbol GBTC. This move came after a U.S. appellate court mandated the SEC to revisit its decision to reject Grayscale’s application to convert the GBTC to a spot ETF.

Grayscale is among several major asset managers, including BlackRock and Fidelity, vying for SEC approval to launch spot Bitcoin ETFs. Seyffart remains optimistic about the prospects, maintaining his prediction of a 90% likelihood of an ETF approval by or before January 10, 2024, as the regulatory landscape continues to evolve.