Grayscale will focus energies on spot Ethereum products, CEO says

Grayscale Investments will focus on converting its Ethereum trust — the world’s largest — to spot exchange-traded products, CEO Michael Sonnenshein said on Wednesday.

“At Grayscale we decided to focus our energy on our spot products. That’s really core to our DNA,” he said during an event in London that was hosted by the Financial Times.

On Tuesday, media reported that the crypto-native asset manager had withdrawn its application to the Securities and Exchange Commission to provide an Ether futures ETF.

It had filed the application in October.

Sonnenshein said the asset manager was withdrawing the application because a number of futures products are already available for investors.

As DL News has reported, VanEck’s EFUT and ProShares’ EETH dominate the brutally competitive Ethereum ETF field, accounting for over 90% of total trading volume at launch.

“Sometimes we will file for a product. That doesn’t necessarily mean it’s going to come to market,” Sonnenshein said

All eyes on Ether ETFs

Grayscale paved the way for the approval of Bitcoin spot ETFs by winning a legal case against the SEC that allowed it to convert its Bitcoin Trust to an ETF.

The SEC granted Grayscale’s application — plus 10 others from various asset managers, including BlackRock and Fidelity Investments — in January

Since the wild success of these funds, which have seen almost $12 billion in net inflows, attention has turned to the approval of spot Ethereum products.

Grayscale, along with BlackRock, VanEck, ARK Invest, Fidelity, Invesco, and Hashdex, has applied to convert its Ethereum trust to a spot ETF.

The industry will know what the SEC is thinking when the regulator makes a decision on the first application, VanEck’s, on May 23.

Mini Trust

Grayscale has also filed to provide a mini trust — a smaller fund seeded with assets from the larger trust.

Craig Salm, chief legal officer at Grayscale, has said the Grayscale Ethereum Mini Trust aims to complement the rest of the firm’s Ethereum-based line of products to support a range of investors.

The mini trust “would launch as a lower-fee alternative spot Ethereum ETF and is designed for investors interested in optimising their Ethereum ETF investment for a ‘buy-and-hold’ strategy in their brokerage or retirement account, for example,” Salm said.

Analysts aren’t bullish on the chances of the SEC approving any of the applications for spot Ether products.

For one, Ethereum’s regulatory status isn’t clearly defined. SEC chair Gary Gensler has been evasive about whether Ethereum is a security.

Plus, Gensler suffered political blowback from anti-crypto politicians in the Biden administration after the SEC approved spot Bitcoin ETFs — though, arguably, the agency had no choice after it lost in court to Grayscale.

On Wednesday, Sonnenshein said while it was difficult to know what the SEC is thinking on Ethereum, Grayscale is “optimistic that the SEC will do the right thing by investors.”

He added that “Grayscale Ethereum Trust is already an SEC reporting company. We file 10-Ks and 10-Qs [disclosures to the SEC], and we’ve always been a business that pushes our regulators to allow crypto to be brought further and further into the regulatory perimeter.”

Reach out to the author at joanna@dlnews.com.