Grayscale Submits New Proposal for Spot Ethereum ETF: Unpacking the Ethereum Mini Trust

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In a significant move that could reshape the current negative stigma prevailing about the unlikely approval of spot Ethereum ETFs by the US SEC, Grayscale Investments has officially announced its submission of an S-1 filing for the Grayscale Ethereum Mini Trust, on April 23, 2024. 

Detailed Breakdown of the Proposed Ethereum Mini Trust

Grayscale’s proposal involves the creation of the Grayscale Ethereum Mini Trust, to be listed on the NYSE Arca under the proposed ticker “ETH,” contingent upon necessary regulatory consents. 

The company stated in its press release that “Grayscale recently submitted a registration statement on Form S-1 for a new spot Ethereum ETF called Grayscale Ethereum Mini Trust.”

The initiative also includes an Information Statement on Schedule 14C relating to the Grayscale Ethereum Trust (ETHE), detailing the mechanics of how the new ETF would be seeded through a spin-off. Specifically, a designated portion of Ether underlying ETHE shares would be used to establish the Grayscale Ethereum Mini Trust, with shares distributed pro rata to ETHE’s shareholders.

Craig Salm, Grayscale’s Chief Legal Officer, elaborated on the process: “Shares of ETH would be distributed proportionally to ETHE shareholders, so that ETHE shareholders maintain their same exposure to Ether – though spread between two products, ETHE and ETH, instead of just ETHE.”

Rationale Dual Ethereum ETFs

The launch of two distinct Ethereum ETFs by Grayscale is part of a broader strategy to diversify product offerings and meet varied investor needs and interests.

The proposed Grayscale Ethereum Mini Trust, with its lower fee structure, aims to attract investors with a buy-and-hold strategy, especially those looking to incorporate Ethereum into their brokerage or retirement accounts. 

On the other hand, the existing Grayscale Ethereum Trust is noted for its liquidity and established track record, characteristics highly valued by many U.S. investors and capital allocators. 

Update on the SEC’s Decision on ETH ETFs

One month out from the @SECGov’s deadline to either approve or deny the $ETH spot ETFs.

Today, the SEC delayed making decisions on applications from @FTI_US and @Grayscale.

As has been widely reported, the consensus is that because there has been little to no meaningful…

— Eleanor Terrett (@EleanorTerrett) April 23, 2024

Approval from the Securities and Exchange Commission (SEC) is approaching its deadline in late May 2024 for deciding on similar Ethereum ETF applications by Grayscale, Franklin Templeton and BlackRock. 

Fox Business’s Eleanor Terrett recently noted, “Issuers say it is not looking very promising,” sharing the lack of meetings between SEC officials and issuers.

Meanwhile, Salm explained, “Before spot Ethereum ETFs are allowed to list and trade on national exchanges in the United States, their registration statements must be declared effective and other regulatory requirements must be approved.”

Investors currently holding ETHE shares need not take any action to prepare for the proposed spin-off. If approved, the process will automatically seed the creation of the new Grayscale Ethereum Mini Trust, distributing new ETH shares to investors seamlessly.

As the deadline for the SEC’s decision on Ethereum ETFs nears, Grayscale’s proactive submission of the Form S-1 for its Ethereum Mini Trust underscores a strategic attempt to navigate the complex regulatory environment. 

This proposal could potentially influence the broader context of cryptocurrency ETFs in the U.S., where regulatory hesitance has often slowed the expansion of such financial products.