Investors in Grayscale Bitcoin Trust (GBTC) are up in arms over the recent inquiry from Senator Kevin Sherman to the US Securities and Exchange Commission (SEC). Sherman's letter has raised questions about Grayscale's practices and the ability for shareholders to redeem their shares.

Grayscale's move to increase the number of issuing GBTC shares is said to have impacted the share's trades, resulting in it trading lower than its net asset value. At the time of writing, data from ycharts showed the discount narrowing to 39.76%. The company's decision, however, has caused concern among thousands of GBTC investors, who worry about the safety of their investments.

In his letter to the SEC, Sherman addressed different topics related to Grayscale's practices. He asked whether Regulation M had an effect on stakeholders redeeming their shares and inquired of the company's lack of an independent director on its board. Furthermore, Sherman also questioned Grayscale's 2% Bitcoin-based fee, in place of traditional mutual funds that usually have a 1% fee.

Grayscale previously refused requests to allow redemptions, due to the prohibition of simultaneous sales and redemption of the same security, per the Regulation M. Despite the fear of storage difficulties that come with owning cryptocurrencies directly, many GBTC investors are still worried about the safety of their investments.

Sherman's inquiry has received various opinions from the crypto community. Interestingly, others critical of him argued his anti-crypto comments were evident. Sherman is known to have a negative view when it comes to Bitcoin, as he has labeled Bitcoin holders as "tax evaders" in the past. On the other hand, it seems he is now pursuing an avenue for investor protection.

Looking at the impact of the letter on Grayscale, recently the firm is in a heated battle with the SEC over converting its Bitcoin Trust into a spot exchange-traded fund (ETF). Grayscale's parent company, Digital Currency Group, and its subsidiary, Genesis have also encountered their own issues. In January this year, Genesis filed for bankruptcy protection.



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