Krista Lynch: Wall Street Is Going All In On Digital Assets (Insider Take)

Institutional interest in digital assets has shifted from unanswered meeting requests to clients asking for education and products, Krista Lynch said. The change is real but not yet broad across the full asset landscape: advisor conversations remain concentrated on Bitcoin and Ethereum, and advisors are available on only a few platforms. Their questions about staking and other product details reflect rigorous diligence, not automatic adoption.

Grayscale has worked with authorized participants and other facilitators to let investors contribute tokens in kind to crypto ETFs. Lynch said this can connect crypto-native investors to traditional-rail features such as margin, collateral, institutional custody and brokerage accounts, while potentially supporting tax and succession planning. She cautioned that she cannot give tax advice, but said investors have generally become comfortable that contributing tokens to a 33 Act grantor trust transfers their basis and is not a taxable event.

The SEC initially restricted Bitcoin ETF creation and redemption to cash because of concerns about broker-dealers handling crypto, then allowed in-kind transactions last summer. Lynch said in-kind creation and redemption can help ETF shares trade at net asset value. Grayscale wants vehicles that were previously private placements to have two-way creation and redemption and trade at parity, rather than remaining constrained by one-way mechanics.

Grayscale has launched a Zcash ETF and may be able to accept Zcash in kind from holders. Whether newer assets can be supported depends on platform availability, substantial diligence and client demand. Lynch described Zcash as privacy-focused and said it may appeal to people concerned about AI surveillance who want ownership and sovereignty. That potential interest does not remove the practical hurdles to making an asset available through institutional platforms.

Grayscale filed last week to tokenize two 40 Act funds: Bitcoin and Ethereum covered-call products intended to bring yield on chain through traditional vehicles. Re-tokenizing ETF interests onto digital rails is still exploratory, Lynch said, and the strongest use cases have yet to emerge. She sees the possibility of combining brokerage, tax and succession-planning features with on-chain access, but presented that as an area for experimentation rather than an established benefit.

Advisor adoption depends on more than interest in the assets. Lynch said advisors typically begin discussing a product at roughly $100 million and assess liquidity, spreads and whether investors can exit. Grayscale’s Crypto Connect offers half-day education sessions, while The Stack publishes short articles on crypto topics. Brokerage accounts can also give investors ways to direct who receives their shares, with fewer comparable arrangements on chain; some programs may let ETF shares serve as margin or collateral, potentially putting otherwise idle Bitcoin to work and improving access to loans.

Grayscale hired Seth Polito to lead its on-chain asset management and tokenization efforts. Lynch said an innovation exemption has provided a sandbox for experimentation after clarity legislation failed to pass. She expects traditional and digital finance to converge, with tokenization and 24/7 trading playing important roles, while emphasizing that the best applications remain uncertain.