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Grayscale is evaluating the possible tax consequences associated with spot Bitcoin (BTC) exchange-traded funds (ETF) following inaccurate reports circulating about unfavorable tax implications.

In a series of posts on X (formerly Twitter), Grayscale clarified that retail investors of the Grayscale Bitcoin Trust (GBTC) are not expected to incur tax implications when the fund sells Bitcoin to generate cash for meeting share redemptions.

Grayscale explained this is due to the GBTC being structured as a grantor trust, which means the entity establishing the trust is the proprietor of the assets in this case, the underlying Bitcoin for income and tax purposes.

Cash redemptions of grantor trusts are not taxable events for non-redeeming shareholders like retail investors, the post stated while explaining its difference from mutual funds:

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This follows recent reports that the United States Securities and Exchange Commission (SEC) held another meeting with Grayscale to further discuss its spot Bitcoin ETF application.

On Dec. 8, Cointelegraph reported that Grayscale and Franklin Templeton sat down with the SEC to review their applications, only a day after representatives from Fidelity appeared before the SEC.

Meanwhile, just days before, on Dec. 5, the SEC pushed back the decision on Grayscales spot Ether (ETH) ETF application until Jan. 24, 2024.

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Grayscale mulls over potential tax implications for spot Bitcoin ETFs - Cointelegraph