Grayscale Investments, which holds the world’s largest supply of Bitcoin and other cryptocurrencies, announced on Wednesday that it is appointing former State Street executive David LaValle to lead an ETF division.
The news is significant because it signals that Grayscale expects the Securities and Exchange Commission, which has repeatedly withheld approval for a Bitcoin ETF, to give a green light for one in the near future.
Currently, Grayscale controls tens of billions of crypto assets on behalf of investors, but makes them available in the form of shares in a trust—a legal workaround that has provided the company with a lucrative niche for years, but whose days are numbered due to the expected arrival of crypto ETFs.
ETFs, or exchange-traded funds, are sold as shares on major exchanges (unlike the Grayscale trust products) and allow retail investors to get exposure to baskets of shares or commodities for a low price through the purchase of a stock.
According to LaValle, ETFs are “a battle-tested piece of financial engineering” that first gained popularity as a way for investors to buy overseas equities, and then evolved to offer exposure to commodities and a wide variety of other executives.
LaValle, whose title at Grayscale is Senior Managing Director, Global Head of ETFs, predicts the launch of crypto ETFs will unfold smoothly once the SEC approves the product.
He added that Grayscale is well poised to sell ETF shares once that approval takes place, noting the company has already contributed much of the necessary technical and staffing infrastructure. The company is planning an ETF not only for Bitcoin but also for Ethereum and various other cryptocurrencies, as well as baskets of cryptocurrencies.
Grayscale is hardly the only firm planning to launch a crypto ETF. As of March, there were at least seven ETF applications pending before the SEC—and that number continues has only risen in recent months. This raises the question of which of these competing ETFs will prove most popular in the market.
LaValle says the popularity of various ETFs will be determined in large part by the fee the various companies charge customers, as well as the costs they pay to source the cryptocurrencies that back the shares. He added this means that it will be critical for the various ETF offerings to have a reliable source of liquidity—implying that Grayscale will be in good position since it already sits on a vast amount of crypto.
LaValle, who recently served as CEO of financial data firm Alerian, will report to Grayscale CEO Michael Sonnenshein.
