Grayscale Investments aims to gain share in US ETFs

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Grayscale Investments, the digital currency asset manager, has launched its first exchange-traded fund and is looking to gain market share in the United States this year before expanding to other regions.

David LaValle, Grayscale Investments

David LaValle, global head of ETFs at Grayscale Investments, told Markets Media: “In 2022, we would like to position ourselves as a significant U.S. player in ETFs, and then consider geographic expansion into Europe and Asia.”

In February 2022, Grayscale Investments listed its first ETF. The equity fund is the first to track the Bloomberg Grayscale Future of Finance Index that the two companies launched in January 2022.

Michael Sonnenshein, Managing Director of Grayscale Investments, said in a statement at the ETF’s launch: “While Grayscale has established itself as a global leader in digital currency investing, the future of finance demands a much broader mandate.We are proud to announce our first ETF in partnership with Bloomberg as we embark on this strategic expansion of our business.

The Bloomberg Grayscale Future of Finance Index tracks 22 companies representing three pillars of the “future of finance” – financial foundations such as asset managers and stock exchanges involved in enabling the digital economy; technological solutions; and digital asset infrastructure such as companies directly involved in mining, energy management, and activities that power the digital asset ecosystem. The index will be rebalanced quarterly.

LaValle said that through the new ETF (GFOF), investors have the opportunity to gain exposure to companies that are critical to the evolution of the digital economy.

“The digital asset ecosystem is like the internet in 1995 right now,” he added. “If investors had bought internet infrastructure providers, they could have avoided the dotcom crash.”

LaValle was also involved in the initial growth of the ETF market and expects digital asset funds to follow a similar growth trajectory. He joined Grayscale in August 2021 after serving as Managing Director of Alerian and S-Network Global Indexes, an independent index provider. Previously, LaValle was also the US head of SPDR ETF Capital Markets and a member of the management team of State Street Global Advisors and he was also Nasdaq’s Exchange Traded Product Marketplace.

He noted that in 1993 it was considered exotic for ETFs to provide exposure to the S&P 500 to retail clients, whereas today many strategies and asset classes are included in ETF envelopes. .

The top three ETF providers in the US market account for 78.5% of assets according to ETFGI, an independent research and advisory firm. At the end of 2021, BlackRock’s iShares had ETF assets of $2.5 trillion, or about a third, 34.2%, of market share. In second place, Vanguard held $2.1 trillion, a 28.8% market share, followed by State Street’s SPDR ETFs with $1.1 trillion and 15.4% market share.

LaValle argued that Grayscale has a unique perspective as an issuer of ETFs as a manager of digital currency assets, particularly around new themes related to the digital economy.

“We have an unconstrained ETF franchise and are open-minded in the index methodology used to track aspects of the digital economy,” he added. “We will be disruptive and introduce new themes as we operate at the forefront of the new economy.”

Additionally, LaValle said Grayscale is a global brand and has enough assets under management to be one of the top 15 global managers, despite only being founded in 2013. Grayscale Investments had more over $51 billion in assets under management as of December 3, 2021.

Grayscale trust conversion

Along with launching new equity ETFs, Grayscale has pledged to convert all of its 16 investment products, including its flagship product Grayscale Bitcoin Trust (GBTC), into ETFs.

The United States Securities and Exchange Commission has not approved a spot bitcoin ETF, although the SEC has approved future bitcoin ETFs.

In October 2021, NYSE Arca filed with the SEC to convert Grayscale’s Bitcoin Trust into a spot bitcoin ETF. The trust was launched in 2013, received a public listing in May 2015, and became an SEC filing company in January 2020. Grayscale said it is the largest bitcoin investment vehicle, holding approximately 3.4% of all bitcoins in circulation.

Michael Sonnenshein, grayscale investments

Sonnenshein said in a statement, “By becoming the premier crypto SEC reporting investment vehicle, GBTC has helped drive the entire digital currency ecosystem forward. As we file for conversion of GBTC to ETF, the next natural step in the evolution of the product, we recognize that this is an important time for our investors, industry partners and all those who realize the potential of digital currencies to transform our future.

Lavalle said the SEC has a 240-day comment period, so a decision should be made in early July.

Grayscale also believes that because the SEC approved a futures-based Bitcoin ETF, the regulator has created a level playing field for spot Bitcoin ETFs. Lawyers for Davis Polk’s asset manager have submitted a comment letter to the SEC saying the SEC is “arbitrary and capricious” and in violation of the Administrative Procedure Act (APA).

Jurisdictions outside of the United States have approved spot Bitcoin ETFs. For example, Fidelity launched a spot bitcoin ETF in Canada in December 2021 and listed a physical bitcoin ETP on the Frankfurt Stock Exchange on February 15, 2022.

The German exchange said in a statement that its crypto ETN offering on Xetra now includes 40 products from nine vendors and has an average monthly order book turnover of around €1 billion.

Investors can participate in the performance of cryptocurrencies through crypto ETNs without having to set up crypto wallets or use unregulated crypto trading platforms. All crypto ETNs on Xetra are centrally cleared by the central counterparty of the exchange, so investors also benefit from significantly reduced risks when settling trades.

LaValle said Grayscale would be open to listing ETFs outside of the United States.

Tendencies

Sonnenshein noted five crypto trends in his letter to investors in early 2022 – the development of crypto infrastructure such as exchanges, wallets and analytics software; the continued proliferation of protocols; expansion of Web3 and Metaverse; Use cases for NFT beyond digital art and regulatory development.

Sonnenshein wrote that while some believe regulation goes against the ethics of crypto, Grayscale sees increased regulation as inevitable and beneficial.

“Never in the asset class lifecycle have we seen regulators and policymakers as engaged and articulate with the crypto ecosystem as they are today,” he added. “It allows the conversation to move around how these new technologies – when provided with the right regulatory frameworks – can thrive, keeping crypto businesses in the United States and setting a global standard for regulation. cryptography.”

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