Grayscale has formally submitted a request to the Securities and Exchange Commission (SEC) to convert its closed-ended AAVE trust into an exchange-traded fund (ETF). The proposed ETF is slated for listing on NYSE Arca, marking another significant step in Grayscale’s efforts to broaden its crypto investment products following the recent successful conversion of its Bitcoin Trust into a spot Bitcoin ETF.
The AAVE token, the native asset of the Aave protocol, currently boasts a market capitalization of around $1.8 billion, with its token price hovering around $119—a noteworthy 9% increase on the day. This performance reflects AAVE’s storied history in the cryptocurrency market, highlighted by its all-time high of $661.69 reached in April 2021.
Grayscale’s Strategic ETF Expansion
Grayscale’s move to file for the AAVE ETF conversion closely follows its successful efforts with the Bitcoin Trust. Having transitioned multiple closed-ended funds into ETFs, Grayscale is now looking to tap into the burgeoning interest surrounding decentralized finance (DeFi) assets. AAVE, known for its impact within the DeFi ecosystem, serves as a key player offering lending and borrowing services, ideally positioning itself for this expansion.
The proposed AAVE ETF is structured with a 2.5% sponsor fee based on its net asset value (NAV), to be paid in AAVE tokens, aligning the fee model with the asset’s functionality within the DeFi space. Moreover, Grayscale has confirmed Coinbase as the custodian and prime broker for the ETF, ensuring that custody of the tokens meets industry standards and bolsters investor confidence.
Increased Competition for AAVE Listings
Despite Grayscale’s notable filing, it faces stiff competition from other asset managers pursuing similar ETF offerings for AAVE. In December 2025, Bitwise made headlines for submitting applications for a total of 11 crypto-focused ETFs, which included a dedicated AAVE product. This competitive landscape places additional pressure on Grayscale as it strives to become a leading entity in bringing an AAVE ETF to the U.S. market.
As interest in crypto-focused ETFs at an individual token level increases, the approval of Grayscale’s AAVE ETF could be significant. It might set a precedent for the SEC’s stance on other crypto ETFs and their acceptance in the financial ecosystem, should the regulatory body deem it viable.
Future Prospects for AAVE and Grayscale
The next steps for Grayscale heavily depend on the SEC’s assessment of its filing. If given the green light, the AAVE ETF could pave a more conventional path for investors seeking exposure to the Aave protocol without the necessity of direct token ownership. Success with this ETF might further facilitate the mainstream adoption of DeFi-related investment mechanisms.
As the crypto industry develops, innovative products like the Grayscale AAVE ETF could become increasingly prevalent, bridging the gap between traditional finance and the rapidly growing DeFi space. The approval and eventual market listing of the AAVE ETF would mark a pivotal point in the evolution of cryptocurrency-based financial products.
