Grayscale’s AAVE ETF Proposal
Grayscale has filed paperwork with the SEC to convert its AAVE trust into an exchange-traded fund. The filing came in February 2026, and it represents another step in the company’s strategy to expand its ETF offerings beyond Bitcoin. I think this move shows how traditional investment structures are gradually adapting to include more specialized crypto assets.
What’s interesting is the timing. Grayscale made this decision after Bitwise, another institutional crypto manager, had already submitted the first proposal for an AAVE ETF. That happened back in December of last year, when Bitwise filed paperwork covering eleven separate funds. It seems like there’s a bit of a race happening here, with firms trying to establish themselves in what might become a competitive space.
The AAVE Token Context
AAVE is the native token for the Aave protocol, which is one of the major platforms in decentralized finance. People use it for lending and borrowing crypto assets. The token has a market cap around $1.8 billion, which isn’t huge compared to some others, but it’s established. It’s trading at about $119 right now, up nearly 5% in the last day.
But here’s something to consider: the token hit its all-time high back in April 2021 at over $660. So even with recent gains, it’s still well below that peak. That context matters when thinking about why investors might be interested in an ETF product.
Grayscale’s ETF Strategy
Grayscale has been down this road before. The company successfully converted its Bitcoin Trust into an ETF after a legal battle with the SEC. That victory opened the door for other spot Bitcoin ETFs in the US. Now they’re applying the same approach to different assets.
The proposed AAVE ETF would charge a 2.5% sponsor fee based on net asset value, and interestingly, that fee would be paid in AAVE tokens themselves. Grayscale plans to use Coinbase as both prime broker and custodian, and they want to list on NYSE Arca.
Broader Competitive Landscape
This isn’t Grayscale’s only move lately. Just last month, the company announced plans to convert its NEAR-linked trust into an ETF too. They filed a Form S-1 with the SEC for that one. The NEAR Trust holds about $900,000 in assets, according to their website statement.
What caught my attention in that statement was the disclosure about how the trust’s shares have sometimes traded at “both higher and lower prices compared to their net asset value, with these differences being quite significant at times.” That’s the kind of volatility you see with these products before they become mainstream ETFs.
There are already some AAVE investment products in European markets, like the 21Shares AAVE ETP and the Global X AAVE ETP. But a US-listed ETF would be different—it would give American investors a more familiar way to get exposure without dealing directly with crypto exchanges.
Analysts suggest Grayscale wants to establish a significant position with AAVE, which has been drawing investor attention lately. Whether the SEC will approve this particular conversion is another question entirely. The regulatory environment for crypto ETFs remains complicated, especially for assets beyond Bitcoin and Ethereum.
Still, the trend seems clear: asset managers are looking for ways to package more crypto assets into traditional investment vehicles. It’s a gradual process, with each new filing testing the boundaries of what regulators will accept.
