In a recent turn of events, the US Securities and Exchange Commission (SEC) has approved Grayscale Investments’ application for a spot Ethereum (ETH) exchange-traded fund (ETF). Sharing the news on Tuesday, Nate Geraci, President of The ETF Store, announced on X (formerly Twitter) that the SEC has officially acknowledged the filing for the potential conversion of the Grayscale Ethereum Trust (ETHE) into an ETF.
SEC has acknowledged Grayscale's spot-on ETF filing. This would be the conversion of $ETHE into an ETF. pic.twitter.com/JMmutgbakZ — Nate Geraci (@NateGeraci) October 23, 2023
Grayscale’s Ethereum Trust Holds 2.5% of Ether in Circulation
Initially submitted on October 2, 2023, in collaboration with NYSE Arca, the proposal aims to convert the Grayscale Ethereum Trust, the largest Ethereum investment vehicle globally, into an ETF.
Presently, the trust holds an impressive 2.5% of the circulating ETH and manages assets worth $5 billion. According to a press release, the transition to an ETF has long been anticipated as the final phase of the trust’s lifecycle.
Like its Bitcoin (BTC) counterpart, the Grayscale Ethereum Trust operates by holding the underlying asset, enabling investors to purchase shares representing a fraction of the total holding. However, the transformation of ETHE into an ETF would allow investors to trade it on the stock exchange, backed by physical Ethereum, thereby broadening its accessibility and appeal to potential investors.
US Court Orders SEC to Review Grayscale Bitcoin ETF
Grayscale’s move aligns with the market trend, where several firms have filed for Ethereum ETFs based on futures contracts rather than physical ETH. These contracts involve agreements to buy or sell financial assets at predetermined prices at future dates, providing a speculative avenue for investors to wager on the asset’s price trajectory.
The new development comes in the wake of the SEC facing pressure from various financial firms, including BlackRock and Fidelity, to approve spot Bitcoin and Ethereum ETFs, aiming to streamline the integration of cryptocurrencies into traditional financial systems.
In the United States, a court has also mandated that the regulator review Grayscale’s filing to convert its Bitcoin Trust into a Listed BTC ETF. The new order from the United States Court of Appeals for the District of Columbia follows an initial court ruling on August 29, asking the SEC to approve Grayscale’s application or file an appeal before October 13.
However, the SEC failed to present an appeal for the ruling, and, according to a filing on October 23, the Court of Appeals has issued a formal mandate for the SEC to review its decision on the Grayscale Bitcoin ETF.
Last week, the asset management company submitted a proposal to the SEC to list shares of its Bitcoin Trust on the New York Stock Exchange Arca under the ticker GBTC.
While the SEC has yet to approve any of the Bitcoin spot ETFs filed under its jurisdiction, Grayscale’s Chief Legal Officer Craig Salm urged the securities watchdog in July to greenlight all eight Bitcoin ETF applications fairly and systematically without choosing the winners and losers.