TAO Rallies as Grayscale and Bitwise File for First U.S. ETFs

• Grayscale and Bitwise filed SEC proposals for ETFs targeting Bittensor's TAO token, aiming to offer regulated institutional exposure.
• If approved, the ETFs could expand TAO's investor base by reducing technical barriers for traditional investors.
• TAO recently underwent a halving event that reduced token emissions by 50%, potentially increasing scarcity.
• Regulatory uncertainty remains as the SEC has not yet classified TAO, creating approval headwinds.

Bittensor's TAO token gained attention after Grayscale and Bitwise filed proposals for U.S. exchange-traded funds targeting the decentralized AI asset. Grayscale submitted an S-1 registration to convert its Grayscale Bittensor Trust into a spot ETF listed on NYSE Arca under ticker GTAO. Bitwise filed for a hybrid ETF allocating 60% to direct TAO holdings and 40% to European ETPs tracking the token according to the filing. The filings signal growing institutional interest in AI-themed crypto assets, leveraging Bittensor's network where participants earn TAO for contributing machine-learning models.

What Do the Grayscale and Bitwise Filings Mean for TAO?

Grayscale's filing aims to transition its existing over-the-counter trust, holding $7.9 million in TAO assets, into a NYSE Arca-listed ETF according to reports. The product would use a hybrid creation mechanism allowing authorized participants to deposit tokens or cash through custodians Coinbase and BitGo as per the filing. Bitwise's proposal adopts a more complex structure that combines direct token exposure with European ETPs to navigate liquidity challenges as described in the filing.

Both approaches target TAO's $2.3 billion market cap following the halving event, which reduced daily emissions by 50%. The filings could increase market visibility and liquidity for the token if approved. That said, Grayscale's 2.5% expense ratio reflects the specialized nature of this emerging asset class.

How Could These ETFs Reshape Institutional Access to Decentralized AI?

The proposed ETFs would provide the first U.S.-listed vehicles for regulated exposure to Bittensor's TAO token. Grayscale's structure mirrors TAO's value without requiring investors to hold the underlying asset directly. This parallels the firm's approach with Bitcoin and Ethereum products, aiming to make decentralized AI accessible through traditional brokerage accounts.

Institutional adoption could accelerate given Bittensor's expanding use cases in fraud detection and on-device AI according to market analysis. A regulated wrapper mitigates operational risks like self-custody that often deter traditional investors. By contrast, Bitwise's hybrid model introduces counterparty exposure to European ETP issuers and potential valuation gaps from time-zone differences as noted in filings.

What Regulatory Hurdles Remain for TAO ETFs?

The SEC has not classified TAO as a commodity or security according to regulatory updates, creating significant approval uncertainty. Regulators may scrutinize Bittensor's token model, including staking rewards and governance functions, under existing frameworks as reported in analysis. Grayscale emphasized that its filing doesn't guarantee approval since the trust currently doesn't meet exchange listing standards as stated in the filing.

Bitwise's reliance on European ETPs adds operational complexity that could prolong regulatory review according to market observers. The SEC has historically resisted altcoin-based products over market manipulation concerns. Final decisions may take months as regulators assess whether TAO markets can withstand large-scale ETF creations and redemptions as indicated in regulatory filings.