Grayscale Files for Ethereum Trust to ETF Conversion

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  • Grayscale has recently submitted an application to the SEC seeking approval for the conversion of its Ethereum Trust into an exchange-traded fund
  • The company calls it the “final stage” of its plans for the Ethereum Trust 
  • The Grayscale Ethereum Trust currently holds 2.5% of all Ethereum in circulation, making it a substantial investment vehicle in the crypto space.

Grayscale is seeking to expand on its Bitcoin ETF plans by filing for an Ethereum spot ETF conversion. Grayscale operates the Grayscale Ethereum Trust (ETHE) alongside its Bitcoin Trust and wants to double up by turning it into a fully-fledged spot ETF alongside its Bitcoin product. NYSE Arca filed a 19b-4 filing to the Securities and Exchange Commission (SEC) on Grayscale’s behalf for the conversion of ETHE into a spot Ethereum ETF, which Grayscale CEO Michael Sonnenshein called a “natural next step” in the product’s evolution.

ETF is “Final Stage” of Ethereum Trust

Since its inception in 2019, the conversion of Grayscale Ethereum Trust into a spot ETF has been envisioned as the “final stage” of its intended lifecycle, according to a press release yesterday announcing the filing. The fund’s ETH assets are valued at approximately $5.14 billion, while its shares collectively amount to only $3.6 billion, with ETHE shares trading at a notable 30% discount relative to the underlying ETH holdings of the trust.

Sonnenshein commented in the press release that Grayscale is determined to “offer investors transparent and regulated access to crypto through product structures that are familiar,” adding that the company recognizes the application as “an important moment to bring Ethereum even further into the U.S. regulatory perimeter.”

Under the proposed ETF structure, ETHE shares would be directly redeemable for the actual underlying ETH assets, effectively aligning the firm’s net asset value with its share value. This alignment has the potential to narrow or eliminate the discount, making it a more attractive investment option. Following the announcement of this transformative plan, ETHE shares experienced a substantial 6.15% spike in value on the same day.

Legal Victory Will Boost Hopes

Grayscale’s hopes will have been boosted by its legal victory against the SEC in August concerning its efforts to convert the Grayscale Bitcoin Trust into a spot Bitcoin ETF where the court ruled that the SEC had acted in an “arbitrary and capricious” manner in rejecting Grayscale’s spot Bitcoin ETF application while allowing alternative futures-based Bitcoin ETFs to move forward.

This legal precedent may play a pivotal role in Grayscale’s pursuit of similar ETF conversions for its Ethereum Trust.