Grayscale’s CEO reveals reasons for entering European ETF market

The firm is primed for launches, hires and potentially acquisitions

Jamie Gordon

a man smiling for the camera

Michael Sonnenshein, CEO of Grayscale, has not ruled out the possibility of acquiring a smaller crypto exchange-traded product (ETP) issuer following the firm’s entrance into the Europe earlier this week.

Speaking to ETF Stream, Sonnenshein (pictured) said it is a "compelling time" to be entering the European market given the opportunities its more developed crypto ETP landscape offers his firm.

The world’s largest cryptocurrency asset manager kicked off its European adventure by listing the Grayscale Future of Finance UCITS ETF (GFOF) across exchanges this week via white-label ETF issuer HANetf.

Sonnenshein revealed the asset manager will initially have minimal physical presence in Europe despite the challenges this could potentially bring.

“We felt it was a compelling time to launch into European but without having boots on the ground,” Sonnenshein stressed. "We thought in terms of speed to market and being able to work with established players with a track record of bringing products to market, it would be great to market with someone like HANetf."

While partnering with external service providers is something Grayscale also does in the US, the ETF issuer’s entry this side of the pond is certainly a work-in-progress.

“We are still doing our due diligence and our homework on different jurisdictions,” he continued. “I would certainly not rule out us continuing to not only bring other crypto-focused products into Europe but also other strategies.

“We are merely at a phase of exploration and trying to determine the best products, delivery mechanisms and wrappers to bring to Europe.”

However, a cautious start does not mean Grayscale has modest plans for the continent and the possibility for an acquisition is certainly not out of the question for the asset manager.

“I would not want to speculate on [acquisitions] but I also would not want to rule anything out. As we continue to grow and expand, who knows?” 

Sonnenshein added it is “certainly possible” Grayscale could change the face of crypto ETPs in Europe. As Vanguard has become synonymous with passive index investing, he argued investors could favour large, crypto-native managers when seeking out exposure to digital assets.

One edge Grayscale has is its focus on investor education, he said, particularly around underlining the potential of subsector diversification across smart contracts, DeFi, privacy and more.

Another component will be its attempts to engage with regulators including more crypto-sceptical watchdogs such as the Financial Conduct Authority (FCA).

“Direct engagement, it will not be done by writing a paper and mailing it off to them,” he stressed. “Direct engagement is how we have done it in the US and other jurisdictions.”

With the Securities and Exchange Committee (SEC) yet to approve a spot bitcoin ETF in the US and Grayscale’s application to convert its flagship bitcoin trust into ETF format set to expire on 6 July, some might question whether the firm’s move across the Atlantic is a sign it is losing faith in the prospect of SEC approval.

“In the US, the Grayscale team is putting their full resources behind making sure GBTC converts to an ETF. It is a matter of when, not if,” he added.

If the firm’s European adventure is a move of ambition rather than necessity, it will be interesting to see if it can translate its previous successes to new frontiers – or whether crypto market headwinds and Europe’s unique challenges will give it pause for thought.

“Looking around Europe, there are different financial hubs with unique investor proclivities and behaviours, different regulatory temperatures, at different stages of adoption for digital asset and blockchain-based economies.

“We have to tailor our approach to each of these centres,” he concluded.

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