VanEck and Grayscale Intensify ETF Race with BNB Amendments

On October 23, 2023, VanEck and Grayscale submitted amendments to their ETF proposals to include Binance Coin (BNB). This escalation in their strategies for altcoin exposure comes as competition for spot cryptocurrency ETFs heats up. Issuers are betting on institutional and retail interest in diversifying beyond Bitcoin and Ethereum.

BNB, Binance’s native token, has historically linked its value to activity within the Binance ecosystem, including token burns and transaction fee discounts. Despite scrutiny from the SEC, which argued BNB should be classified as a security in its June lawsuit against Binance, it maintains a market capitalization of approximately $34 billion.

VanEck’s updated prospectus outlines its intention to launch a spot BNB ETF, pending regulatory approval. If approved, this would allow investors to gain direct exposure to BNB without managing the underlying asset. Grayscale mirrored this move with a similar amendment, signaling its pivot toward altcoin ETFs. Both firms did not provide specific timelines in their filings.

Grayscale’s recent court victory against the SEC over its proposed Bitcoin spot ETF may provide insight into this new strategy. The DC Circuit Court ordered the SEC to reconsider its rejection, citing the agency’s inconsistent treatment of spot and futures ETFs. While this ruling did not guarantee approval, it set a precedent encouraging broader altcoin filings.

The shift toward BNB indicates a growing appetite for the altcoin segment. Data from CoinShares revealed that altcoins account for nearly 25% of weekly cryptocurrency inflows, with Ethereum leading at 8%. By targeting BNB, VanEck and Grayscale aim to meet demand for diversification beyond a Bitcoin-dominated ETF market.

However, the regulatory landscape poses significant risks. BNB’s connection to Binance—currently under investigation for alleged unregistered securities operations—could complicate the SEC approval process. “The SEC’s scrutiny of Binance is a double-edged sword,” said James Seyffart, ETF analyst at Bloomberg Intelligence. “It may delay approvals, but it forces issuers to address compliance challenges early, which could ultimately strengthen their filings.”

The timing of these amendments suggests a strategic move. The SEC’s recent delay in deciding on Bitcoin ETF applications hints at a regulatory backlog. By filing now, VanEck and Grayscale appear to be positioning for first-mover advantage in a potential altcoin spot ETF market, should the SEC adopt a more favorable stance.

Critics question the utility of BNB in an ETF context. Unlike Bitcoin, viewed as ‘digital gold’, or Ethereum, supported by its smart contract platform, BNB’s valuation is closely tied to Binance’s corporate activities. Any regulatory clampdown on Binance could directly affect the token’s price. “Investors are likely to weigh the unique risks associated with a token like BNB. The ETF structure does not eliminate the underlying asset’s exposure to operational and reputational risks,” noted Todd Sohn, ETF strategist at Strategas Research Partners.

The inclusion of BNB could also pave the way for ETFs based on other exchange tokens, such as FTT (FTX Token) or CRO (Crypto.com Coin). Their viability as ETF underlyings depends on regulatory clarity and consumer demand.

Market reception to these amendments has been muted. Shares of VanEck’s publicly traded funds saw no significant price movement, while Grayscale’s GBTC traded at a 17% discount to its net asset value, reflecting challenges in bridging the trust and ETF markets.

For BNB, the filing news resulted in a 3% intra-day price jump, trading at $220 (USD) following the amendments. Binance declined to comment, stating it remains focused on “ensuring compliance with global regulations.”

Both firms are expected to engage intensively with the SEC in the coming months as the regulator evaluates these proposals. The push for crypto ETFs—spanning Bitcoin, Ethereum, and now BNB—highlights the industry’s broader pivot toward institutional legitimization. Whether this shift broadens access to cryptocurrency markets or shifts volatility into new financial instruments remains uncertain.