Grayscale® Bitcoin Trust (and Bitcoin itself) might get the most ink but at Grayscale, we know that Grayscale® Ethereum Trust and its underlying Ethereum have gained significant traction and interest over the years. Today, it’s clearer than ever that there is strong demand for an Ethereum access product as the Trust has grown to become the largest Ethereum investment vehicle in the world. This past quarter alone (2Q20), we saw the average weekly investment into the Grayscale Ethereum Trust hit $10.4 million, amounting to record quarterly inflows into the Trust to the tune of $135.2 million. In fact, demand for Grayscale Ethereum Trust accounted for almost 15% of total inflows into Grayscale products during our biggest quarter yet!
The Trust started as a private placement solely available to accredited and institutional investors to gain exposure to Ethereum in the form of a familiar security without the obstacles associated with buying, storing, and safekeeping Ethereum directly. In June of 2019, shares of the Trust started trading publicly under symbol: ETHE, further broadening the product’s availability to all investors with access to U.S. securities markets.*
As our team continues to create and sponsor investment products — like the Trust — that fit within existing regulatory frameworks, forging ahead with our mission toward making digital currency investment products accessible to all investors, we are excited to share today’s milestone…
We have publicly filed a Registration Statement on Form 10 with the Securities and Exchange Commission (SEC) on behalf of Grayscale Ethereum Trust. This is a voluntary filing that, if it becomes effective, would designate the Trust as an SEC reporting company and register its shares pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended.
The filing is subject to SEC review, however, if it becomes effective it will designate the Trust as the second digital currency investment vehicle to attain the status of a reporting company by the SEC. The first would be Grayscale Bitcoin Trust, which became an SEC reporting company in January.
Similar to our filing on behalf of Grayscale Bitcoin Trust, we want to be clear that this voluntary filing is not and should not be confused as an effort to classify the Trust as an exchange traded fund (ETF). Our products are not ETFs but they do have a familiar structure to investors because they’re modeled after popular investment products.
If the Form 10 becomes effective, the structure of the Trust will not change and it will continue to not operate a redemption program nor trade on a national securities exchange. Here’s what would change, if it becomes effective:
- FIRST MOVER: It would designate the Trust as an SEC reporting company and register its shares pursuant to the Exchange Act, the second digital currency investment vehicle to do so (Grayscale Bitcoin Trust being the first).
- LIQUIDITY OPPORTUNITY: Accredited investors who have previously purchased shares in the Trust’s private placement would have an earlier liquidity opportunity, as the statutory holding period of their private placement shares would be reduced from 12 to 6 months.**
- INVESTOR AUDIENCE: As many institutions restrict investments in instruments that are not registered with the SEC, a broader set of institutional investors may begin to consider the Trust accordingly.
- SEC REPORTING: While the Trust currently publishes quarterly and annual reports as well as audited financial statements pursuant to the OTC Markets Alternative Reporting Standard (ARS), the Trust would instead file its quarterly and annual reports as well as audited financial statements as 10-Qs and 10-Ks with the SEC, along with current reports on Form 8-K, in addition to complying with all other obligations under the Exchange Act.
For more information on today’s announcement, please refer to our press release, the currently publishes, and the Information Statement. Additionally, we encourage prospective or current Grayscale Ethereum Trust shareholders to view our FAQ page for further details on the Form 10 process and its implications. To learn more about Ethereum, we invite you to review our Building Blocks report on ETH, which is intended for investors of all levels to better understand the underlying assets of our products.
*The Trust offers a private placement to accredited investors. The investment objective of the Trust is for the Shares to reflect the value of Ethereum held by the Trust, less the Trust’s expenses and other liabilities. The Shares have historically traded at a substantial premium over such value and the Trust has been unable to meet its investment objective.
**The holding period reduction would go effective after Grayscale Ethereum Trust has been a reporting company for at least 90 days and has satisfied the other requirements under Rule 144 of the Securities Act of 1933.
This article is not an offer to sell or the solicitation of an offer to sell or buy any security in any jurisdiction where such an offer or solicitation would be illegal, nor shall there be any sale of any security in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.