Grayscale Doubles Down on Spot Ethereum ETFs with New Mini Trust Proposal

The wait for a decision on spot Ethereum ETFs in the US continues, but Grayscale Investments isn’t giving up. In a move that could reshape the regulatory landscape, Grayscale announced the filing of a Form S-1 registration statement for a brand new product – the Grayscale Ethereum Mini Trust.

Dueling Trust Structure

• Grayscale Ethereum Trust (ETHE): This existing product will maintain its focus on liquidity and its established track record.
• Grayscale Ethereum Mini Trust (ETH): This new ETF aims to attract buy-and-hold investors with a lower fee structure. It will be listed on NYSE Arca under the ticker “ETH” (pending approval).

Benefits of the Mini Trust

• Lower Fees: Designed to cater to long-term investors, the Mini Trust will likely have a lower expense ratio compared to the existing ETHE.
• Brokerage and Retirement Account Compatibility: The lower fees could make the Mini Trust more attractive for inclusion in traditional investment portfolios.

How the Spin-Off Works

A portion of the Ether holdings currently backing ETHE shares will be used to seed the new Mini Trust. Existing ETHE shareholders will receive new ETH shares distributed pro-rata based on their holdings. This process is designed to ensure ETHE investors maintain their overall exposure to Ethereum.

SEC Decision Still Looms

The clock is ticking for the SEC’s decision on spot Ethereum ETFs. With the deadline approaching in late May, Grayscale’s latest move highlights the ongoing uncertainty:

• Negative Sentiment Persists: Recent comments from industry experts suggest a low chance of approval for spot Ethereum ETFs by the SEC.
• Grayscale Takes Proactive Approach: The Mini Trust filing demonstrates Grayscale’s commitment to navigating the regulatory environment and potentially influencing the future of crypto ETFs in the US.

Global ETF Landscape

• Hong Kong Races Ahead: While the US grapples with regulations, Hong Kong is poised to launch its first spot Bitcoin and Ethereum ETFs by April 30th.
• In-Kind Subscription Model: Unlike US cash-settled ETFs, Hong Kong’s offerings will allow for direct exchange of underlying assets for ETF units, appealing to crypto natives and market makers.
• Lower Expectations for Hong Kong?: Analysts predict that Hong Kong’s ETFs may see significantly lower asset accumulation compared to their US counterparts due to the region’s smaller existing crypto infrastructure.

The race for regulatory clarity in the US and the upcoming launch of spot ETFs in Hong Kong mark a significant development in the global cryptocurrency market. Grayscale’s strategic move with the Mini Trust proposal and the progress in Hong Kong highlight the growing demand for investment vehicles offering exposure to digital assets.