Grayscale: Exempt From Tax Liability

Asset management firm Grayscale stated that the Grayscale Bitcoin Trust has a reliable structure regarding tax matters.

Grayscale is evaluating potential tax consequences related to spot Bitcoin (BTC) exchange-traded funds (ETFs) after misleading reports. The company shared on Twitter that tax implications are not expected for retail investors of Grayscale Bitcoin Trust (GBTC) if the trust sells Bitcoin to generate cash to cover 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

Grayscale emphasized that the structure of GBTC as a grantor trust means the entity creating the trust owns the assets, making it responsible for income and tax purposes. In a Twitter post, Grayscale highlighted the difference from investment funds, stating, "Cash redemptions for grantor trusts are not taxable events for shareholders who do not redeem, such as retail investors." The post also mentioned that many spot commodity ETFs (e.g., gold) are structured as grantor trusts for tax purposes, and GBTC is treated appropriately as a grantor trust.

This clarification follows reports of misleading information, and it coincides with news that the SEC has held further discussions with Grayscale regarding the status of its spot Bitcoin ETF application. Additionally, on December 8th, the SEC extended the decision deadline for Grayscale's spot Ether (ETH) ETF application to January 24, 2024.

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