Grayscale Files AAVE ETF as Coinbase Named Custodian

Grayscale has filed to convert its Aave trust into a spot exchange-traded fund. This adds fresh momentum to the race for the first AAVE ETF in the United States. The firm submitted the filing to the U.S. Securities and Exchange Commission on February 13. The proposed product is called the Grayscale Aave Trust ETF. It would hold AAVE tokens directly and list on NYSE Arca. Coinbase will act as custodian and prime broker. The move places Grayscale alongside Bitwise, which filed a similar proposal earlier. As institutions slowly turn their attention toward DeFi tokens.

Grayscale Enters the AAVE ETF Race

Grayscale is now the second major asset manager to seek approval for an AAVE ETF. Bitwise filed its own proposal in December 2025. Both firms aim to launch the first regulated AAVE investment product for U.S. markets. Grayscale already runs an Aave trust product. That vehicle gave investors indirect exposure to the token. 

Now, the firm wants to convert it into a full ETF. This strategy mirrors its earlier efforts with Bitcoin and other crypto trusts. Those conversions helped bring billions of dollars into the ETF market. The new filing shows that institutional interest is moving beyond Bitcoin and Ethereum. Additionally, asset managers now see DeFi tokens as the next frontier.

Key Details of the Proposed ETF

The proposed ETF will hold AAVE tokens directly. It will not rely on futures or synthetic exposure. This structure gives investors direct price tracking. Grayscale plans to charge a 2.5% sponsor fee. The fee will be paid in AAVE. That rate is higher than many existing crypto ETFs. Still, it reflects the complexity and risks tied to altcoin products.

Coinbase will serve as custodian and prime broker. It will store the tokens and handle execution. The ETF aims to list on NYSE Arca, making it available through standard brokerage accounts. If approved, the product would offer simple and regulated access to AAVE. Investors could gain exposure without managing wallets or private keys.

What This Means for AAVE and DeFi

AAVE powers one of the largest decentralized lending platforms in crypto. The protocol has handled billions of dollars in deposits and loans. It also plays a central role in the DeFi ecosystem. An ETF could open the door to new capital. Many institutions avoid direct crypto holdings due to custody and compliance risks. A regulated ETF removes those barriers.

Bitcoin ETFs saw massive inflows after approval. Some analysts believe a similar trend could happen for major altcoins. But the scale would likely be smaller at first. Still, the filing shows a clear shift. DeFi tokens are moving into traditional finance conversations.

Regulatory Outlook and Broader Impact

The filing marks only the first step. The SEC must review and approve the proposal. That process could take months. While approval is not guaranteed. While regulators remain cautious about single asset altcoin ETFs. Even so, the environment has grown more crypto friendly after recent approvals.

If an AAVE ETF wins approval, it could open the door for other DeFi products. Furthermore, Asset managers are already exploring similar filings. For now, the Grayscale move signals one thing. Institutional demand is expanding beyond the big two and DeFi may be next in line.

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