Grayscale Takes Step in Converting Ether Trust to ETF

Grayscale Takes Step in Converting Ether Trust to ETF

The crypto focused asset manager filed an S-3 registration statement with the SEC Tuesday.

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Finance Reporter
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Reviewed by: Kent Thune
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Edited by: Ron Day

Grayscale Investments, the crypto-focused asset manager that operates the largest bitcoin ETF, took the next step in attempting to convert its Grayscale Ethereum Trust into an exchange-traded fund.

The firm filed an S-3 document with the Securities and Exchange Commission April 23 to register shares of the Ethereum Trust under the Securities Act of 1933, according to the firm’s press release. The prospectus is a vital document necessary for the SEC to move forward before approving the ETF. The ETF would trade with the ticker ETHE.

The New York Stock Exchange Arca already filed a 19b-4 rule change form with the SEC to list shares of the new ETF on their exchange in October. 

Firms Vying to Roll Out Spot Ether ETFs

A number of firms, including BlackRock Inc., Fidelity Investments, and ARK Invest, are vying to roll out their own versions of spot ether ETFs after the historic success of the ten spot bitcoin funds that were approved by the SEC in mid-January. So far, the new spot bitcoin ETFs have accumulated about $60 billion under management, even as Grayscale's Bitcoin Trust (GBTC) continues to see billions in outflows due to its comparatively high management fee of 1.5%.

So far, the agency has delayed multiple spot ethereum filings, including Grayscale’s 19b-4 rule change earlier on Tuesday, along with a filing from Franklin Templeton.

Ether Hurdles

While the SEC is slated for a May decision on the vehicles, which would hold physically backed Ethereum as opposed to Ethereum futures contracts, analysts and executives doubt that the agency will approve the funds that soon. Unlike in the months leading up to the spot bitcoin ETF approval, the agency has not been meaningfully engaging with issuers on the issues related to their filings, Bloomberg analyst James Seyffart said last month.

etf.com's Sumit Roy agreed the chances of approval are narrowing.

“Given that the Grayscale Ethereum Trust (ETHE) is currently trading at a hefty 25% discount to its net asset value—a significant increase from 8% in March—the market is implying that the odds of a spot ether ETF approval by May aren't very high,” explained etf.com analyst Sumit Roy.

Contact Lucy Brewster at [email protected].

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.