• Grayscale filed for a spot AAVE ETF as competition for crypto investment products intensifies.
• The proposed AAVE ETF will list on NYSE Arca with Coinbase as custodian and prime broker.
• AAVE gained 4.87% in 24 hours while trading far below its 2021 all time high.

Grayscale Investments has filed an S-1 registration with the U.S. Securities and Exchange Commission for a spot AAVE exchange-traded fund. The filing shows the firm plans to convert its existing AAVE Trust into an ETF. The move places AAVE among a small group of DeFi tokens seeking direct ETF exposure in the United States. The application comes as competition for alternative crypto ETFs continues to grow.

The proposed fund would track the price of AAVE, the governance token of the Aave lending protocol. Grayscale plans to list the ETF on NYSE Arca. In addition, the firm intends to use Coinbase as prime broker and custodian. The sponsor fee would stand at 2.5% of net asset value and would be paid in AAVE.

Filing Follows Governance Shift at Aave

The ETF filing arrives shortly after Aave’s community approved a governance proposal to further decentralize its operational structure. The vote attracted strong support from token holders.Consequently, the interest of the market participants in the long-term direction of the protocol revived.

AAVE is a governance and utility token on the Aave platform. The protocol empowers users to either lend or borrow digital assets without utilizing intermediaries. Consequently, it remains one of the more established decentralized finance platforms. Its market capitalization is close to $1.8 billion.

AAVE was trading at $119.02 at the time of reporting. CoinMarketCap resources showed that the token rose 4.87% in the last 24 hours. Nevertheless, it is still far below its April 2021 high of $661.69.

Competitive Pressure in the ETF Race

Grayscale’s filing follows an earlier move by Bitwise. In December, Bitwise submitted paperwork covering 11 separate crypto funds, including an AAVE ETF proposal. That step increased pressure on other asset managers to act quickly.

Grayscale manages billions in digital assets and has expanded its ETF ambitions in recent years. The firm previously secured approval to convert its Bitcoin Trust into a spot ETF after a legal dispute with the SEC. That ruling opened the door for other U.S.-based spot Bitcoin products.

Since then, Grayscale has pursued similar strategies across multiple tokens. The firm recently filed to convert its NEAR Trust into an ETF. It plans to rename the product and shift its listing from OTC Markets to NYSE Arca.

Broader Strategy and Market Context

The Grayscale NEAR Trust held roughly $900,000 in assets at the time of its disclosure. The product has traded at premiums and discounts to net asset value. Such pricing gaps have influenced the firm’s push toward ETF structures.

Meanwhile, European markets already offer AAVE-linked exchange-traded products. These include the 21Shares AAVE ETP and the Global X AAVE ETP. U.S. approval would expand regulated access for domestic investors.

Grayscale has not disclosed a timeline for SEC review. Still, the filing underscores growing institutional interest in DeFi-focused investment vehicles.