October 2, 2023 at 16:50 GMTModified date: October 2, 2023 at 16:50 GMT
October 2, 2023 at 16:50 GMT

Grayscale files to convert Ethereum Trust to spot $ETH ETF

Grayscale has submitted a filing to SEC, requesting to convert its Ethereum Trust to Spot Ethereum ETF.

The world’s largest crypto asset manager is looking to convert its Ethereum Trust (ETHE) to a spot Ethereum exchange-traded fund (ETF).

Grayscale has filed an application for its approval from the US Securities and Exchange Commission (SEC).

ETHE, launched in March 2019, received a public quotation in May 2019, and voluntarily became an SEC reporting company in October 2020. It has now grown to become the largest Ether investment vehicle in the world, with assets under management of nearly $5billion, representing 2.5% of all Ether in circulation.

On top of this, the Trust’s shares trade millions of dollars in daily volume, and the product is held by more than a quarter of a million American investor accounts. At the time of writing, the Ethereum Trust is valued at $4.9bn and accounts for around 2.5% of circulating $ETH.

Grayscale CEO Michael Sonnenshein commented on the latest move saying: “At Grayscale, our unwavering commitment is to offer investors transparent and regulated access to crypto through product structures that are familiar. As we file to convert ETHE to an ETF, the natural next step in the product’s evolution, we recognize this as an important moment to bring Ethereum even further into the U.S. regulatory perimeter.”

The request for conversion was filed in a form 19b-4 today, 2 October, by the New York Stock Exchange Arca (NYSE). This comes on the back of SEC’s clearance of the first Ethereum futures ETFs.

Talking about Grayscale’s partnership with NYSE Arca on this filing, Grayscale Global Head of ETFs, David LaVal, said: “This filing is another important milestone as Grayscale continues to build its best-in-class ETF team, product suite, and capabilities – serving investors as a globally respected asset manager with unmatched crypto expertise.”

The firm’s existing trust invested in Ether futures contracts gives it an indirect means of exposure to $ETH. A spot ETF, on the other hand, will invest in the underlying asset itself.

Various other asset managers have also filed for approval of a spot Ether ETF. Most of them were eventually denied by the SEC on investor protection grounds. The asset managers applying for Bitcoin ETFs included Fidelity and Cathie Wood’s ARK. Just last week, Invesco/Galaxy Digital revealed a similar filing.

Grayscale also awaits approval from the SEC to convert its Grayscale Bitcoin Trust (GBTC) to an ETF. GBTC is the world’s largest Bitcoin fund and offers institutional investors to gain exposure to Bitcoin without holding the asset directly.

The regulatory watchdog had previously rejected Grayscale’s application for the same, while approving a number of futures-based bitcoin ETFs. Following this, the company filed a lawsuit against the SEC for denying the conversion in June last year.

In this legal battle to convert Grayscale’s GBTC into an ETF, Grayscale Investments gained approval from a federal court to launch the first Bitcoin ETF in the US. In doing so, the District of Columbia Court of Appeals overturned the SEC’s decision that initially denied the application.

The recent filing reflected Grayscale’s ongoing commitment to converting its entire family of crypto investment products to ETFs. Here, the platform takes its cryptocurrency products through an “intended four phase lifecycle” ending with a conversion to an ETF. It currently offers 17 different cryptocurrency investment products.