Cryptocurrency asset manager Grayscale Investments has recently announced the formation of a new business arm, named Grayscale Funds Trust. The trust is aimed at managing the various publicly traded financial products managed in-house. In conjunction with this announcement, Grayscale has filed a registration statement with the United States Securities and Exchange Commission (SEC) to launch three new crypto-focused exchange-traded funds (ETFs).
These new funds include an Ethereum Futures ETF, a Global Bitcoin Composite ETF and a Privacy ETF. The Global Bitcoin Composite ETF focuses on investments in exchange-traded products related to, or backed by, Bitcoin (BTC). This can include investments in Bitcoin mining companies. The Ethereum futures ETF, on the other hand, grants investors indirect exposure to the potential future value of Ether (ETH) through shares that track ETH’s price. Lastly, the Grayscale Privacy ETF invests in companies working on blockchain-based privacy technology.
However, as of the time of writing, none of the three ETFs are available for public purchase until the registration statement for Grayscale Funds Trust receives approval from the SEC. This presents a major obstacle for Grayscale, as it is currently still embroiled in a conflict with the SEC regarding the conversion of its $17 billion Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF product.
Back on January 13, Grayscale sued the regulator, alleging that the denial of its application was an arbitrary move by the SEC as it treated crypto spot traded exchange-traded products differently from futures products. Grayscale’s argument rests on the fact that there is a 99.9% correlation between the prices in the Bitcoin futures market and the spot Bitcoin market.
It is worth noting that the SEC has approved several Bitcoin futures ETFs, which expose investors to the potential future value of BTC. However, the regulator has rejected all applications for a spot Bitcoin investment product, citing concerns over exposing investors to potential fraud and market manipulation.
This ongoing battle raises questions about the future of crypto-focused ETFs and their potential impact on the market. On one hand, the approval of such ETFs could open new doors for investors and bring fresh capital into the crypto space. On the other hand, regulators like the SEC must weigh the risks involved carefully and ensure that investors are not exposed to undue risk.
In summary, the recent developments by Grayscale Investments in launching a new trust and proposing three new crypto-focused ETFs have reignited the conversation about the future of such investment products in the cryptocurrency space. As the company continues to navigate the regulatory challenges it faces, only time will tell if these ETFs will be approved or face a similar fate as other spot Bitcoin investment products.