Grayscale's Krista Lynch: advisors now flood inbox for crypto education, in-kind ETF flows accelerate

In-kind transactions are catching on with crypto natives, not just traditional investors

Krista Lynch, Senior Vice President at Grayscale, explains that in-kind creation and redemption—allowing investors to put their own tokens directly into an ETF—was originally expected to appeal mainly to investors hesitant to use crypto-native tools like wallets. Instead, she says demand is increasingly coming from crypto-native holders, including Zcash holders ("maxis"), who want the tax and estate-planning benefits of a brokerage structure. She notes that basis transfers when tokens go into a grantor trust, meaning it is not a taxable event, and that ETF shares in a brokerage account carry standard succession rules that "doesn't really exist on chain as much as it does in the traditional broker world."

She also describes a regulatory evolution: authorized participants, required to be broker-dealers, initially could only do cash creations for Bitcoin ETFs, but the SEC allowed in-kind transactions "last summer." Lynch says in-kind creation/redemption is how ETF shares are kept trading at net asset value, calling it a capital efficiency benefit.

Looking further ahead, Lynch says Grayscale has had conversations, especially at Token2049, about investors retokenizing ETF shares back onto digital rails after using the ETF wrapper for tax or custody benefits. She calls this "the best of both worlds" but is careful to note "whether that catches on remains to be seen."

Grayscale has filed to tokenize two new covered call products

Lynch says Grayscale filed last week for two 40 Act funds—Bitcoin and Ethereum covered call strategies—structured to bring yield-generating traditional vehicles onchain. She credits the SEC's "tokenization exemptions" as creating a sandbox that lets the industry experiment, calling the current environment "a positive byproduct of clarity not getting passed." She says Grayscale recently hired Seth Pledo as head of onchain asset management to lead these tokenization efforts, part of a broader push she describes as finding "the highest and best use case" through trial.

Advisors have flipped from avoidance to flooding Grayscale for education

Lynch describes a stark shift in advisor behavior:

"It's been funny to watch the evolution go from us being like, 'Will you please have a conversation with us?' and them not picking up the phone to now them, they inundate us in our emails to please educate me."

— Krista Lynch. She attributes this partly to a Harris poll study Grayscale conducted showing younger generations' first investment experiences are typically digitally native rather than through traditional brokerages.

She says most advisor conversations still center on Bitcoin and Ethereum, with advisors asking detailed questions about staking mechanics, and that many such conversations "persisted for over a year" before advisors granted client access. Grayscale has run educational programs including an in-person series called Cryptoconnect and a content hub called "the stack." On sizing, Lynch says advisors generally won't engage with a product until it reaches "$100 million or so," though she notes crypto ETFs have "quickly eclipsed" that bar. Asked how much of the advisor landscape remains untapped, she says "I think there's a ton left to go," noting Grayscale is only on "a couple of platforms" out of many. On Zcash specifically, she says client interest is driven by concerns about AI and quantum computing, with Robbie, the host, adding that Zcash functions as "AI resistant money." Lynch closes by describing a broader move toward "convergence" between traditional and digital finance, citing an upcoming Washington conference where she expects discussion of tokenization and 24/7 trading.