Grayscale Files to Convert ETHE Trust into Ethereum Spot ETF with SEC

Grayscale has submitted an application to the U.S. Securities and Exchange Commission (SEC) to convert the Grayscale Ethereum Trust (ETHE) into an Ethereum spot ETF.

Grayscale files to convert ETHE Trust into Ethereum spot ETF with SEC. Photo: CryptoSlate

On the evening of October 2nd, crypto investment management firm Grayscale announced that it has filed a petition with the SEC seeking to convert its Grayscale Ethereum Trust (ETHE) into an Ethereum spot ETF.

The trading partner for Grayscale's Ethereum spot ETF will be the NYSE stock exchange.

As explained by Coin68, similar to the Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust is an investment product providing exposure to Ethereum (ETH), the world's second-largest cryptocurrency. Established in 2019, this trust enables U.S. brokerage account holders to access ETH without directly holding the digital asset.

ETHE is currently the largest Ethereum investment product globally, managing nearly $5 billion in assets.

Grayscale hopes that converting ETHE into an ETF will enable investors to exchange shares directly for ETH, facilitating arbitrage opportunities and addressing price discrepancies. During the cryptocurrency market downturn from 2021 to 2023, ETHE experienced significant price deviations from the Ethereum market price due to the absence of a direct conversion mechanism. At the market bottom in December 2022, the ETHE discount to ETH reached nearly 60%, later narrowing to 30% at the time of writing.

Grayscale previously attempted to convert GBTC into a Bitcoin spot ETF in 2022 but faced rejection from the SEC. Following a legal battle, a U.S. appellate court ruled in favor of Grayscale, compelling the SEC to reconsider Grayscale's Bitcoin spot ETF proposal.

Despite these efforts, the SEC has yet to approve any cryptocurrency spot ETFs, citing concerns over market manipulation and fraud within the cryptocurrency market.

Just days ago, the SEC postponed decisions on 8 proposals for Bitcoin spot ETFs from major Wall Street firms, including BlackRock, Invesco, VanEck, Fidelity, Bitwise, Valkyrie, WisdomTree, and ARK Invest.

Similarly, the commission has deferred the review of ARK Invest and VanEck's Ethereum spot ETF proposals to late December 2023.

However, the SEC has approved Ethereum futures ETFs for trading, with up to 9 ETFs possibly launching this week, led by VanEck and Valkyrie.