Grayscale discusses the potential tax implications of spot BTC ETFs

Grayscale is evaluating the potential tax consequences associated with Bitcoin (BTC) exchange-traded funds (ETFs) following circulating inaccurate reports of unfavorable tax implications.

In a series of posts on procedures.

We are also working to obtain the appropriate regulatory approvals for the listing $GBTC To NYSE Arca, we are examining the potential tax implications of spot Bitcoin ETFs that need to be sold $ Bitcoin Cash holdings to meet stock redemptions.
That’s why we’re talking about this now. (1/7)

– Grayscale (@Grayscale) December 15, 2023

As we work to obtain the appropriate regulatory approvals to load $GBTC into NYSE Arca, we are examining the potential tax implications for spot Bitcoin ETFs that need to sell BTC holdings to raise cash to meet share redemptions.
That’s why we’re talking about this now. (1/7)

Grayscale explained that this is because GBTC is structured as a grantor fund, meaning the entity creating the fund owns the assets — in this case, the underlying bitcoin — for income and tax purposes.

“Cash redemptions from donor funds are not taxable to non-redeemable shareholders, such as retail investors,” the post said while explaining its difference from mutual funds:

Unlike mutual funds and many other ETFs, almost all spot commodity ETFs (such as gold) are structured as donor funds for tax purposes. “We take the position that GBTC is treated appropriately as a granting trust.”

This comes on the heels of recent reports that the US Securities and Exchange Commission (SEC) has held another meeting with Grayscale to further discuss the implementation of the Bitcoin Spot ETF.

On December 8, Cointelegraph reported that Grayscale and Franklin Templeton sat down with the SEC to review their applications, just one day after Fidelity representatives appeared before the SEC.

Meanwhile, a few days ago on December 5, the SEC postponed a decision on Grayscale’s Spot Ether (ETH) ETF application until January 24, 2024.

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