Key Takeaways
- • Grayscale filed Form S-1 with the SEC on February 13, 2026, to convert its AAVE trust into a spot ETF, entering direct competition with Bitwise for the first U.S.-listed DeFi token ETF; Bitwise filed first in December 2025, providing a two-month regulatory head start.
- • AAVE token currently trades at $119 with a market capitalization of approximately $1.8 billion, representing an 82% decline from its April 2021 all-time high of $661.69, though the token gained 9% on the filing announcement date.
- • The proposed Grayscale AAVE ETF will charge a 2.5% sponsor fee payable in AAVE tokens, with Coinbase serving as both custodian and prime broker; the fund is intended to list on NYSE Arca.
- • Grayscale's precedent-setting legal victory over the SEC regarding its spot Bitcoin Trust conversion enabled subsequent spot Bitcoin ETF approvals and establishes the company's regulatory track record for converting closed-end crypto trusts into ETFs.
- • AAVE underpins Aave protocol, the largest decentralized lending platform in DeFi, and investment products tracking AAVE already trade in European markets through 21Shares and Global X ETPs, demonstrating institutional demand for DeFi token exposure.
Summary
Grayscale Investments has formally entered the race to launch the first U.S.-listed decentralized finance (DeFi) token exchange-traded fund by submitting paperwork to convert its AAVE trust into a spot ETF. The SEC received the Form S-1 filing on February 13, 2026, positioning Grayscale as the second major asset manager pursuing AAVE ETF approval, following Bitwise's earlier December 2025 submission of 11 separate fund proposals.
The competitive landscape reflects growing institutional appetite for DeFi exposure. AAVE serves as the native governance and utility token for the Aave protocol, the largest decentralized lending platform in the DeFi ecosystem. At the time of filing, AAVE traded at $119 with a market capitalization near $1.8 billion, up 9% on the announcement. While this represents substantial appreciation from recent lows, current valuations remain significantly depressed relative to the token's April 2021 all-time high of $661.69—an 82% decline from peak levels. The token's volatility underscores the speculative nature of DeFi assets, though established DeFi protocols like Aave have demonstrated staying power through multiple market cycles.
The proposed Grayscale AAVE ETF will impose a 2.5% annual sponsor fee on net asset value, with fees payable directly in AAVE tokens. Coinbase will serve dual roles as custodian and prime broker, providing infrastructure and regulatory oversight. The fund will list on NYSE Arca, leveraging Grayscale's established distribution channels. Grayscale's track record strengthens its competitive position: the company's landmark legal victory against the SEC regarding its spot Bitcoin Trust conversion established the regulatory precedent that ultimately enabled multiple spot Bitcoin ETFs to launch in U.S. markets. This precedent demonstrates Grayscale's ability to navigate complex digital asset regulation successfully.
Notably, AAVE investment products already trade in regulated European markets through offerings such as the 21Shares Aave ETP and Global X Aave ETP, alongside various DeFi-focused index products providing AAVE exposure. This European precedent provides additional regulatory validation for institutional-grade AAVE investing infrastructure. Concurrently, Grayscale filed to convert its NEAR-linked closed-end trust into an ETF, signaling broader strategic expansion beyond Bitcoin and Ethereum into alternative Layer 1 protocols and DeFi tokens. The NEAR trust held approximately $900,000 in assets at announcement and will similarly move to NYSE Arca listing. These parallel filings indicate Grayscale's strategic positioning to capture institutional flows into an expanding universe of tokenized assets as regulatory frameworks mature.
The competitive landscape reflects growing institutional appetite for DeFi exposure. AAVE serves as the native governance and utility token for the Aave protocol, the largest decentralized lending platform in the DeFi ecosystem. At the time of filing, AAVE traded at $119 with a market capitalization near $1.8 billion, up 9% on the announcement. While this represents substantial appreciation from recent lows, current valuations remain significantly depressed relative to the token's April 2021 all-time high of $661.69—an 82% decline from peak levels. The token's volatility underscores the speculative nature of DeFi assets, though established DeFi protocols like Aave have demonstrated staying power through multiple market cycles.
The proposed Grayscale AAVE ETF will impose a 2.5% annual sponsor fee on net asset value, with fees payable directly in AAVE tokens. Coinbase will serve dual roles as custodian and prime broker, providing infrastructure and regulatory oversight. The fund will list on NYSE Arca, leveraging Grayscale's established distribution channels. Grayscale's track record strengthens its competitive position: the company's landmark legal victory against the SEC regarding its spot Bitcoin Trust conversion established the regulatory precedent that ultimately enabled multiple spot Bitcoin ETFs to launch in U.S. markets. This precedent demonstrates Grayscale's ability to navigate complex digital asset regulation successfully.
Notably, AAVE investment products already trade in regulated European markets through offerings such as the 21Shares Aave ETP and Global X Aave ETP, alongside various DeFi-focused index products providing AAVE exposure. This European precedent provides additional regulatory validation for institutional-grade AAVE investing infrastructure. Concurrently, Grayscale filed to convert its NEAR-linked closed-end trust into an ETF, signaling broader strategic expansion beyond Bitcoin and Ethereum into alternative Layer 1 protocols and DeFi tokens. The NEAR trust held approximately $900,000 in assets at announcement and will similarly move to NYSE Arca listing. These parallel filings indicate Grayscale's strategic positioning to capture institutional flows into an expanding universe of tokenized assets as regulatory frameworks mature.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.