Jan 12, 2024

Grayscale Chief Legal Officer Craig Salm joins "First Mover" to reflect on the asset manager's role in the approval of a spot bitcoin ETF in the U.S. Plus, Randi Zuckerberg opens up about her journey from Facebook to Broadway to blockchain.

Video transcript

Our fee really is a reflection of the premium value that G BT C brings. Do you anticipate that fee coming down? There's no plans to do that right now. That was Grayscale Chief Legal Officer Craig. So on the ETF C War, that's heating up over here in the United States. That interview in just a few moments. Good morning and welcome to first mover on coin desk on this show. We bring you all the top news headlines of the day and some interviews with industry heavy hitters. We got two great ones today. So stick around. You don't want to miss them. If you are a regular watcher or first mover, you might have noticed that our format is a little different these days. If you have any feedback for us, send me ad M on Twitter, my handle on the screen right now. We will try to implement any serious feedback we get. All right, let's take a look at the news headlines today like I said, that ETF fee war is heating up here in the United States and it's looking like a race to the bottom when it comes to ETF fees. The latest asset manager to reduce their fees is Franklin Templeton who filed with the SEC today to reduce their fee from 0.29% to 0.19% making them the cheapest ETF available in the United States till August 2nd 2024. The funding manager says it will also waive fees for its ETF till the fund reaches $10 billion assets under management. After initially revealing their fees on Monday, several providers quickly reduced their fees to gain some semblance of competitive advantage spot. Bitcoin ETF S clocked a whopping $4.6 billion in trading volume on Thursday with Franklin Templeton accounting for $65 million with the spot. Bitcoin ETF trading hands. Attention is turning to a potential for a spot, Ether ETF and Blackrock, Ceo Larry Fink has some comments in an interview with C NBC on Friday. He said, quote, I see value in having an Ethereum ETF and quote, he added these are just stepping stones towards tokenization and I really do believe this is where we're going to be going. Blackrock's I should. Bitcoin Trust debuted on Thursday. As we all know by now after sec approval, the fund accounted for roughly $1 billion of the total 4.6 billion trading volume that the ETF S collectively saw Blackrock's spot. Bitcoin ETF fees are at 25 basis points. The asset management giant is offering a promotional rate of 12 basis points on the 1st $5 billion during the 1st 12 months. And crypto asset manager coin shares exercised its option to buy the ETF unit of Valkyrie Investments coin shares secured the option on Valkyrie funds in November and said the decision to exercise was based on the S ECs approval of the listing. Valkyrie's Bitcoin Fund ticker BRRR or Burr, as I like to say, accounted for $9.3 million of the 4.6 billion in trading volume on Thursday. Valkyrie's fee is set at 0.49%. I also believe that they reduced their fee recently, fees, fees, fees. That's been one of the big stories behind the launch of the spot, Bitcoin ETF if you haven't figured that out already and while asset managers like Franklin Templeton continue to slash fees, put their products on sale in an effort to gain more market share. This next asset manager stands strong at 1.5%. The highest fee of the 11 ETF issuers. Now I spoke to Greyscale chief legal Officer Craig. So yesterday, a big milestone day for this industry when 11 spot Bitcoin ETF issuers began trading their products in the United States. Greyscale launched the very first ETF in the US at 4 a.m. Eastern time in pre trading hours. This journey has been a long and hard one for folks in this industry. It's been a decade long and to set up this interview, I think it's important that we understand the events leading up to it. So I'm gonna take you on a little trip down memory lane. In 2008, Satoshi Nakamoto introduced the concept of Bitcoin. And in 2013, Cameron and Tyler Winklevoss, the founders of Crypto Exchange, Gemini and also the twins behind Facebook filed their first application with the SEC for a spot, Bitcoin ETF. Then in 2016 gray scale filed with the regulator to convert its Bitcoin Trust into a spot. Bitcoin ETF. One year later in 2017, the Winklevoss twins received a rejection on their application. This is the first rejection that they received after updating it several times. The SEC then said that the Bitcoin markets weren't mature enough. That same year, Grayscale withdrew its first attempt to convert its trust into an ETF. Then a year later in 2018, the Winklevoss twins got their second rejection from the SEC. The agency saying that the exchange didn't have the right controls to prevent manipulation this time. Fast forward to 2020. Now that's when Gray Scale transformed its trust into an SEC reporting entity. It became the first publicly traded Bitcoin Fund in the United States. Then late in 2021 Grayscale filed an application again to the SEC to convert its trust into a spot. Bitcoin ETF in 2022 surprise surprise, the SEC rejected Grayscale application along with applications from other potential Bitcoin ETF issuers. Those included the likes of fidelity and bit wise this prompted Grayscale to sue the SEC. And in August last year, this is what everyone is talking about. Now, a Federal Appeals Court in Washington ruled in favor of Gray Scale saying the SEC did not justify its rejection of the proposal. Along the way, asset managers like Blackrock fidelity Valkyrie and Moore felt their own applications for an ETF product. And this week 15 years after the Bitcoin white paper was published, a spot exchange traded product has come to fruition, giving access to the asset class to millions of Americans. Let's take a listen to what Craig had to say about Grace Gill's journey, the few wars and what's next? Joining me now to discuss is Greyscale Investment Chief Legal Officer Craig Sam Craig. Welcome to the show, Jen. Thank you so much for having me. That's right at 4 a.m. today. G BTC printed its first trade. I woke up at around 330 to make sure it all went through smoothly and was happy to see G BTC was the first Bitcoin. You have to trade in the US. So really a historic milestone. Well, congratulations, everyone at Gray scale has to be feeling euphoric. We've spoken to a few other of the managers who've received approval. What's the celebration been like? The mood here at Gray could not be better. What you have is the ation of nearly a decade of work in launching G BT C back in 2013. Always with the intention of uplifting as a Bitcoin ETF when permitted by the regulatory environment. Yesterday, we saw approval of the 19 4 application to allow the uplifting. The three went effective and those two pieces coming together to allow G BT C to trade today as the first Bitcoin ETF here in the US. So the mood here could not be more positive. It's a big day for, for G BT C its shareholders and really the Bitcoin and crypto communities overall. I have to imagine you guys are probably planning a party or something sometime soon to celebrate. Uh You know, once we got the approvals in that was a celebration in its way. But there was still a lot of mechanical things we had to do to make sure that the uplifting happen smoothly. Uh Now that we saw the first trade today starting at 4 a.m. and then continuing through the opening bell right now we've seen last I checked over $600 million of volume just in G BT C. That's the amount of volume that we saw yesterday over the full course of day of trading. I'm here at that nice Yara watching it all happen live. So it's really cool just to be here with the gray scale team and see the first day of trading happen. It's really the combination of a lot of hard work amongst gray scale amongst all of the teams here. I can hear the excitement in your voice. Now let's talk, let's talk about uh maintaining that momentum. There are of course 10 other asset managers who also received approval at the exact same time. How do you, how do you maintain this competitive advantage that gray scale has? Of course, we know $27 billion already. Um In gray scales, Bitcoin Fund, how are you planning on being strategic about this as we move forward? Yeah, so firstly, it's amazing to be in such good company with the largest asset managers in the world doing what we have been doing for the last decade that is getting into the Bitcoin and Crypto Space offering Bitcoin ETF. So it's definitely a good company to be in G BT C has been a premium product since its inception. It's the largest Bitcoin Fund in the world, the most liquid, the highest trading volume, the longest track record, it's a premium product and now that it's an ETF, we are going to continue to bring that value to investors. So for investors, looking at the different asset managers who are offering the product, what's the difference? I think one thing you want to look too is those things I mentioned size liquidity trading volume. How tight the BS spreads are? Also, you want to look to an as a manager that is a crypto specialist and I think Gray Scout has really proven to do that. We stand up for our investors, you know, just taking a step back the only reason we got here to allow Bitcoin ETF to exist is because we were willing to challenge the decision from the SEC denying all spot Bitcoin ETF. We did that on the very same day. We were denied back in June of 2021. And the reason why we did it is because we were standing up for our investors. We felt that if the commission is ok with Bitcoin futures, then largely speaking, they really should be ok with spot Bitcoin itself, fast forwarding back to August and a unanimous decision by the DC circuit agreed with that logic and that really, uh you know, plays the trail uh for all of the other asset managers that are now alongside us with their Bitcoin ETF. So I think we show that when we set our mind to something we get it done. We've always said G BT C would become an ETF. And today we have proven that to be true. I mentioned we've spoken to almost all of the other asset managers now and in many of those conversations, um Gray skill is given credit where credit is due for fighting this battle and paving the way how talk to me a little bit more about how you're feeling and the company is feeling, knowing that you challenged the SEC and, and to celebrate this victory last night. And this morning, uh it must be, it's a landmark for the industry, but for, for gray scale itself. The decision to challenge the F CS denial was not something we did lightly. It's, it's never something you should take lightly if you're going to sue your regulator. But we found ourselves in a situation where we were denied and we either could do nothing and continue to operate G BT C is, but we didn't feel that that was the right thing to do by our investors. They deserve a product that is further into the regulatory perimeter. It's the best thing to do for investor protection. And now that you have G BT C as an ETF, we have proven that when we say we're going to do something, we get it done. We also have 17 digital asset products like G BT C that we have every intention of uplifting as ETF when permitted by the regulatory environment. Each of them is going through the four stage product life cycle. We've designed where we start as a private placement, obtain a public quotation, seek to make the product sec reporting and then uplift as an ETF. We've shown we can do that for G BT C and we intend to do that for other products. Are you able to give us any insight into what it was like engaging with the sec ahead of the approvals? We've always had a very constructive dialogue with the commission. I for one have utmost respect for them learning about the asset class wanting to figure out how can we put these assets within traditional investment vehicles, thinking about GB DC, for instance, we filed to make that an SEC reporting company back in 2018. And that opened up a dialogue where we were talking about Bitcoin its use cases, how it trades market structure, custody, accounting, all the things the commission is really focused on when they are fulfilling one of their key mandates of investor protection. And so going through that process, working through disclosures, fast forwarding to after our core victory. And then again, being, you know, being re engaged with the commission, another constructive dialogue with corporation finance and trading and markets. So I have to, you know, give respect to them for grappling with this asset class and one allowing the innovation to flourish while also protecting investors. That that's the job and I think they've done it well. And the fact that we now have Bitcoins, yes, here in the US is a testament to that. So there was no animosity after that court victory over the agency, there's always been a mutually respectful relationship. So, absolutely not. Again, you know, it's not something to do lightly. But if you find yourself in a situation, one of the great things about the American system is that we have Congress that writes the laws, the executive branch that enforces the laws and then the court that interpret the laws. And you find yourself in a situation where you think it's being interpreted, the wrong way, then you have the ability to challenge that. So again, you know, always been a very mutually respectful relationship and we're all just happy that we got to the place that we really think we should have been, which is Bitcoin TF here in the US. OK. I want to come back to that competitive advantage point that we were chatting about just a few minutes ago. We have to talk about these fees. Gray scales fee is at 1.5% which is a lot larger than some of your peers. Some of your colleagues who have the same product, I believe those are between uh 0.2 and 0.9%. What went into deciding to uh be the asset manager with the high fee. We have long projected that we would be reducing our management fee upon G BT C uplifting as an ETF earlier this week, we announced that we reduced it by 25% and we feel that the fee of GB DC is a reflection of the value that we have brought to investors and we'll continue to bring to investors with a premium product. It's the largest Bitcoin ETF in the world. It's the second largest commodity based ETF in the world. It's the most liquid. It has the highest trading volume, I think with fees, you also want to look at the total cost of the vehicle and that's not just the top line management fee, but also the spread of how it trades you want a liquid product that will allow you to get in and out of it with size. So I think there's a lot of features that really go into it. Our fee really is a reflection of the premium value that G BT C brings. Do you anticipate that fee coming down? There's no plans to do that right now. Right now, we're really excited with G BTC on the first day of lifting. Um We're continuing to monitor the trading volume and really impressed to see a lot of what we expected to happen. The vehicle that has been trading since 2015 now uplifting to Iara all of the access that will provide to all those investors that have been on the sidelines waiting for that ETF wrapper to make their Bitcoin allocation. All right, the price of Bitcoin is up this morning, but the outstanding rally we saw this morning was in the price of either some are attributing that to investors, looking towards a spot, Ether ETF approval on the horizon. What's your outlook there? So like G BT C, we have gray scale Ethereum Trust which trades under Checker symbol. Ethe that is designed the exact same way as G BT C. We actually filed a 19 4 for that product similar to G BT C on the very same day that the, the future ETF started trading in the US again because of that belief that if the commission is OK. With the theorem, Futures being an ETF wrapper, then we believe they should also be OK with spot a theorem being an ETF wrapper. And that really goes to the correlation of futures and spot that we proved throughout our DC circuit lawsuit. So Ethereum is absolutely the next product that we're looking towards. And uh you know, that comes to you sometime this summer. So we'll see how that works out with the commission as we engage with them on that. I know that this would just be a shot in the dark. But do you think we could get an approval in the summer? It's difficult to say, you know, Bitcoin Ethereum are different assets, different kinds of use cases, different consensus mechanisms. So there naturally will be questions that will be raised that we will be grappling with. So I look forward to engaging with the commission on that application. We also have 15 other digital asset products that are structured the same way. So eventually we look to bring those through their 4h product life cycle as well. Ok, Craig, we're going to have to leave it there. Congratulations again. And I hope you enjoy the rest of your day and you ride that wave. That was Greyscale Investments, Chief Legal Officer Craig Song, staying on the topic of Bitcoin. Now let's take a look at the chart of the day. The chart of the day is presented by crypto.com the leading crypto platform trusted by over 80 million users worldwide. Bitcoin Miner outflow has hit a multiyear high as tens of thousands of Bitcoin worth more than a billion dollars have been sent to exchanges. Why is this happening? Well, according to crypto quant data, the majority of the Bitcoin has moved from mining company F two pool analyst, Bradley Park told Coindesk that the move is due to miners facing increased costs. Park pointed to the increased costs of F two Pool moving to Kazakhstan and the need to upgrade miners before the having which decreases the rewards for mining and thus the per machine yield. As the reason for the outflow, the next Bitcoin having is expected to take place in April 2024 and some analysts expect the price to catapult to as high as 100 and $60,000 after the event. That's enough. Talk about Bitcoin, let's talk about something totally different now and go beyond Bitcoin on this segment of beyond Bitcoin. We take a look at the creator economy and how this next Trailblazer thinks technology can help creators continue to claim more ownership over their work. Joining us now is Hug founder Randi Zuckerberg. Welcome. Hi, thanks. It's, it's great to be here and always excited to get to chat web three with you, Randy. I'm so excited that you're joining the show. All anyone has been talking about lately is this spot Bitcoin ETF and I am just ready to get back to the creators and hear all about what's going on and what we can look forward to in 2024. But I think it's important for our audience to get to know you a little bit. So talk us through your backstory. Uh A little. How did you get into the Blockchain space? Thanks. And yes, we're definitely on kind of the happy, feel good side of, of everything happening in Web three right now. Exactly. Supporting creators and the arts. It's a, it's a friendly little corner of the space. Um But it's, it's funny, you know, I've always lived two lives in my career as a techie entrepreneur and as an artist. Um and I've gone back and forth between them because for the last few decades, it's been very difficult to combine those two worlds. So I was at the, the front lines of Facebook and Web two. And then I actually left Silicon Valley entirely to perform on Broadway, uh which is something not a lot of people know. Um And when I started to really dive into Web Three, that was the first moment that for me, it made sense to bring tech and the arts together in such a meaningful way. So that's how I fell in love with Web Three and I'm really excited to discuss more today. Ok. So from Facebook, you were one of the minds behind Facebook alive, you left Facebook, you went to Broadway and then Web three entered the chat, talk to me about how you're combining, combining this all under the hug umbrella. Yes. Well, it's interesting because I started to see even, uh, how Broadway was shifting, um, audiences just didn't want to sit in a seat for 2.5 hours and watch a show anymore. The, the economics of Broadway are just changing over the last few years, people want to be a part of the creative process and that was the time that I started really hearing about the community economy and what that meant. Um you know, people were talking about the creator economy for years. But when I started to really hear people mention the words community economy, that's when it really uh captured my attention because I thought yes, we are not in a world anymore where people are just passively watching creators anymore or passively just sitting there. They want to be a part of the process. They want to be a part of the economics. If they discover a creator early, they want to be rewarded for that. So at hug, we're building a platform where we, we have now 10,000 artists and growing every day from all around the world who uh are connecting with fans who are posting their art, who are getting educated, who are minting and printing their work um and really building and growing their creator careers in tandem with their fans. Now you have a technology background. Are you finding that the artists who are joining the platform, who are maybe interested in this new era? I guess for creators are facing a barrier or a challenge when it comes to the technology, as we've seen with so many different platforms, it's not that easy to use this technology right now. There are so many any barriers and that's, that's the problem. I mean, first of all, I, you know, let's talk about the barrier of security in the space. Um You know, almost everyone who I talked to in the space has, you know, fallen victim or almost fallen victim to some sort of a, a hacker scam. It's just so easy when you're rushing and, and you're not verifying information. Um And so, you know, that's definitely one of the biggest barriers to entry is that if people have a bad experience, then they, they don't want to come back and, and buy more digital art or uh participate. Um And then artists on the other hand, you know, they didn't just wake up uh when Web three started and become creators, the these people have been artists for years and years and so many of them now they have um their, their Shopify Store, they have Etsy, they have Pinterest, they have all of these like Web Two world identities and now they have a Web Three Identity also. And uh they don't have the time to manage 19 storefronts. Uh They're, they're hobbyist artists. So that's something we're really trying to, to help with. Um, and then not to mention the fact that they also have to educate their customers at the same time on, on what an NFT or digital art is and how to buy it. You said 10,000 and growing? Where are these artists coming from? Are they mainly us based? No, they're all over the world and that's what's so beautiful about Web Three. We have over 100 and 30 countries represented on Hug. And um actually, even just two months ago, I did, I hosted my own open call on Hug. Anyone can, can do a self service, open call to, to connect and find artists. Um And I wanted someone to design my New York City Marathon. Jersey. I was running the marathon. I wanted an artist to design it. And um the winning artist that was voted on by the community. Uh It's from India and now like we have a really special relationship. We talk all the time on Instagram. I wore this artist's work on like the proudest day of my life. Um And we have this incredible emotional connection with an artist that I never would have met otherwise. So to me, those are, that's just one of everyday beautiful moments that happened through Web Three in the arts. Not only did you create Facebook live and go on to Broadway. You also ran the New York City Marathon. I don't know. My medals won me here. That's like, that's, it's become like my full crypto and running are my full identity these days. I feel like you could, you could merge those two together somehow running on the Blockchain or, or something that should be our next, our next podcast together. There you go. Talk to a little bit more about closing that educational gap. You said 100 and 30 countries. How are you making it easier for creators who want to use the technology? Um And what do you think needs to happen as we move into 2024? Yes. And you know, I will say that creators have all sorts of levels of comfort zones, embracing new technology and not um some of the artists on our platform are, you know, they are fully bought into Web Three and NFTS. Not only that they want to be on the cutting edge of A I they're taking every course that we offer about how artists can have A I as their copilot. Um We have other artists too though that don't even want to use the word NFT or hear it uh or want anything to do with it. Um They have access to all the same tools, but we kind of position their art as you know, digital art that you can leave a tip for the artist and, and you get the digital art and, and that's a way that we are slowly introducing consumers and artists uh onto the Blockchain and into digital art in a way that feels kind of accessible and, and that um tiptoeing you know, are users still interested in digital art. And the reason I ask that is there were a bunch of different stats and information that came out uh near the end of last year saying that trading volume is low for NFTS, especially on the Ethereum Blockchain opens is changing their strategy. There's not that much demand for digital art. Then there's information that comes out at the beginning of this year that says folks are going crazy for Bitcoin ordinal. So they're looking at NFTS in the Bitcoin ecosystems. A lot of NFTS are back up. What's your experience been like working directly with creators and their audiences? How has demand been? Yes, I mean, I will say that most of the artists on hug are doing um one of one art they're not doing these 10,000 generative collections that people are, you know, um doing the same behavior of baseball trading cards and or uh buying them in order to flip them and resell them. Uh Most of the artists who are on our site and the customers that are on our site are there because they want to buy a piece of beautiful art just like you would have it in your home. And I think as, as more and more of our lives go digital and our online um people want to kind of decorate and have beautiful digital lives the same way that they have in their home. So people want beautiful phone backgrounds for their phones. They want zoom backgrounds. They, um you know, they want to have a nice digital art collection. So, uh we are, we are still seeing a lot of volume in the one of one art uh digital art space. But certainly, um, the reselling and those big generative collections have taken a huge hit, Randy. I have to ask you before we wrap. Your brother is the other Zuckerberg behind Facebook. Do the two of you talk about crypto, do the two of you talk about Blockchain and the creator economy um at family dinner, you know, these days, mostly we talk about extreme sports because he has his like M ma fighting. I have my running. Um And that's mostly what dominates the conversation. But, you know, for sure, I think both of us have a real passion these days around the Metaverse Web three where all of this is going and a desire to be on the front line. So, uh I'm, you know, always a huge admirer and looking closely at what meta is building in the space and how much that, you know, drives enthusiasm for the space. So for, for sure, it's a, a topic of conversation, Randy. Thank you so much for joining the show. I look forward to following Hug's journey throughout 2024 and we'll welcome you back for a longer conversation sometime soon. I love it. Thank you so much for having me. That was Hug Founder Randi Zuckerberg. That's a wrap for first mover on a Friday. Thank you so much for watching the show. It means a lot to me and everyone who works on it and thank you to our guests, Grayscale Chief Legal Officer Craig. So and hug Founder Randi Zuckerberg as a note, we sometimes edit interviews on this show for consistency and clarity. If you need more update over the weekend while we're not on the air, check out Coin desk.com. And if you're looking for a Markets update, head on over to the Coin Desk Podcast Network and listen to Market Daily. I'm also the host over there. All right, we hope you have a great weekend. We will not be here on Monday. We are off for Martin Luther King Junior Day. We'll see you on Tuesday.

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