Grayscale Investments Moves to Convert Aave Trust Into Spot ETF

Grayscale Investments filed a registration statement with the U.S. Securities and Exchange Commission (SEC) to convert its closed-ended Grayscale Aave Trust into a spot exchange-traded fund.

The proposed vehicle is expected to list on NYSE Arca, continuing Grayscale’s strategy of transitioning private digital asset trusts into regulated ETF structures.

The filing extends the firm’s broader push in early 2026 to expand spot crypto ETF offerings beyond Bitcoin and Ethereum-linked products.

Fund Structure and Operational Details

The proposed ETF would carry a 2.5% annual sponsor fee based on net asset value (NAV), payable in AAVE tokens.

Coinbase has been designated as both the digital asset custodian and the fund’s prime broker, consolidating custody and trading services under one provider.

The objective of the conversion is to offer regulated price exposure to Aave (AAVE) without requiring investors to directly manage wallets, private keys, or DeFi protocol interactions. By wrapping AAVE exposure into an ETF structure, Grayscale aims to lower operational barriers for traditional market participants.

Market Context and Competitive Landscape

The move follows a December 2025 submission by Bitwise Asset Management, which included AAVE among 11 digital-asset-related fund filings. The competitive dynamic suggests asset managers are positioning early in anticipation of broader SEC acceptance of spot altcoin ETFs.

Following the announcement, AAVE rose approximately 9%, trading near $119, up from roughly $109.17 pre-announcement. The token’s market capitalization stood around $1.8 billion at the time of reporting.

The price reaction reflects immediate speculative positioning around potential institutional inflows, though final approval remains subject to regulatory review.

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Broader ETF Expansion Strategy

The Aave conversion filing is part of a wider expansion by Grayscale. The firm has also submitted documentation to convert its NEAR Protocol Trust (GSNR) and several multi-asset vehicles into spot ETFs.

This progression indicates a shift toward mainstream packaging of DeFi and layer-1 tokens within regulated wrappers, potentially expanding institutional exposure beyond the largest digital assets.

DeFi Implications

Aave remains a central protocol within decentralized finance, with its v3 iteration reportedly generating over $100 million in annualized revenue as of early 2026. As one of the sector’s most established lending platforms, AAVE often functions as a benchmark for DeFi activity and capital flows.

If approved, the ETF conversion would represent a structural bridge between traditional capital markets and DeFi-native tokens. The regulatory outcome will determine whether altcoin ETFs extend beyond experimentation into sustained institutional allocation channels.

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