Wilshire Phoenix’s Potential Challenger to Grayscale Bitcoin Trust (GBTC)

Siamak Masnavi

On Friday (June 12), Wilshire Phoenix Funds, LLC filed a registration statement (Form S-1) with the U.S. Securities and Exchange Commission (SEC) for its proposed "Bitcoin Commodity Trust" (BCT). Will Grayscale Bitcoin Trust (GBTC) finally have some competition?

Wilshire Phoenix, which was founded in 2018, is "a New York based investment management firm dedicated to helping its clients manage assets throughout the investment lifecycle." 

On February 26, the Securities and Exchange Commission "issued an order disapproving a proposed amendment to NYSE Arca Rule 8.201-E to list and trade shares of the United States Bitcoin and Treasury Investment Trust", i.e. i.e. rejected Wilshire Phoenix's proposed Bitcoin-related exchange-traded product (ETP).

In response, Wilshire Phoenix issued a press release, which stated:

"We at Wilshire Phoenix are very disappointed by the Commission’s decision.

"We made every effort to get the SEC’s attention on this important issue, including undertaking extensive analysis that was made available to the SEC staff, submitting key data, and offering to provide additional information to facilitate the listing of a much needed regulated bitcoin related ETP in the United States.

"Unfortunately, the Order shows that all of these efforts did not receive the SEC’s full attention."

William Herrmann, Founder and Managing Partner at Wilshire Phoenix, said at the time:

"Commissioner Peirce’s dissent eloquently captures the investing public’s frustration; I could not agree with her more.

"The SEC has created a test for bitcoin related ETPs that is clearly inconsistent with the Exchange Act.

"Many retail investors are already investing in this commodity and investor demand continues to grow each day.

"Our ETP was created to provide investors with exposure to bitcoin through a regulated and transparent vehicle that also mitigates volatility.

"In my opinion, the Commission has done a great disservice to the public by rejecting this application.

"We are carefully reviewing the Order and determining the best next steps."

Well, now, Wilshire Phoenix is back with a proposal for a new product that it hopes will be easier to get approved by the SEC.

Wilshire Phoenix's prospectus has this to say about Bitcoin Commodity Trust ("the Trust"):

"The Trust will have no assets other than bitcoin, a digital asset based on the cryptographic protocols used by the decentralized, peer-to-peer bitcoin computer network. 

"The Trust will also hold U.S. dollars for short periods of time in connection with the purchase and sale of bitcoin, the payment of redemptions, if any, and fees and expenses of the Trust...

"The investment objective of the Trust is for the Shares to reflect the value of bitcoin held by the Trust, as determined by reference to the CME CF BRR, less the Trust's expenses and other liabilities.

"The Shares will provide investors with exposure to bitcoin in a manner that is accessible and cost-efficient without the uncertain and often complex requirements relating to acquiring or holding bitcoin.

"The Trust will use the CME CF BRR calculated by the Chicago Mercantile Exchange ('CME') as reference rate to calculate its NAV. 

"The CME CF BR is the rate on which bitcoin futures contracts are cash-settled in dollars at the CME and serves as a reference rate in the settlement of financial derivatives based on the price of bitcoin. 

"The CME CF BRR, which has been calculated and published since November 2016, aggregates the trade flow of several bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time."

On June 13, Wilshire Phoenix's Managing Partner told Cointelegraph during an email interview:

"The digital asset market has obviously experienced exponential growth, but the products currently in the space have not evolved with such growth. We think investors deserve more."

Hermann went on to say:

"We look forward to working with both SEC and FINRA staff in connection with the issuance of the shares and having the shares quoted on the OTCQX."

Featured Image by "RyanMcGuire" via Pixabay.com