Regulators Hold Key to Grayscale's Altcoin ETF Ambitions

Grayscale Investments has expanded its efforts to bring more alternative cryptocurrency assets into the regulated investment market, recently submitting a series of proposals with the U.S. Securities and Exchange Commission (SEC) for exchange-traded funds (ETFs) tied to Bitcoin Cash (BCH), Litecoin (LTC), and Hedera (HBAR). These filings underscore the asset manager’s strategy to diversify its offerings beyond Bitcoin and Ethereum, which saw their spot ETFs approved in 2024 after a lengthy regulatory review.

The Bitcoin Cash and Litecoin ETF proposals are being submitted via S-3 registration forms, which are typically used by existing funds seeking to convert into ETFs. These forms rely on the potential approval of the SEC’s proposed Generic Listing Standards for crypto ETFs. If these standards are accepted, they could streamline the listing process for multiple crypto ETFs without the need for individual rule changes for each fund. Grayscale’s Bitcoin Cash ETF is particularly notable, as it would be the first of its kind filed with the SEC.

For the Hedera ETF, Grayscale has opted for a different approach by filing an S-1 registration statement, indicating that the fund is being established as a new offering rather than a conversion from an existing trust. This aligns with the firm’s broader strategy of broadening its crypto ETF lineup to include assets that use non-traditional consensus mechanisms, such as Hedera’s hashgraph technology. Nasdaq has also submitted a 19b-4 application for the Hedera ETF, which the SEC is currently reviewing.

Grayscale’s filings come amid a surge in interest from traditional investors and institutions in diversified exposure to the infrastructure of the decentralized finance (DeFi) ecosystem and blockchain adoption. The firm’s recent Chainlink (LINK) ETF filing, for instance, reflects a growing demand for investment vehicles that provide access to altcoins that support smart contracts and DeFi protocols. The Chainlink ETF, if approved, would allow investors to gain exposure to LINK without the need to store the tokens directly, mirroring the structure of the recently approved Bitcoin and Ethereum ETFs.

The regulatory environment remains a critical factor in the success of these proposals. SEC Chair Paul Atkins has yet to act on the pending applications, continuing a pattern of delayed decisions that has extended into 2025. However, the Trump administration has indicated a more favorable stance toward digital assets than its predecessor, raising expectations that the regulatory climate could shift in favor of crypto ETF approvals. This could potentially catalyze further product launches and increase market accessibility for a broader range of investors.

Grayscale is not the only player in this growing race for regulatory approval. Competitors such as Fidelity, VanEck, and REX Shares have also submitted applications for ETFs tied to a variety of digital assets. This competitive landscape highlights the increasing institutional interest in crypto and the broader recognition of the need for regulated investment vehicles that provide transparency and custodial security.