Under CEO Michael Sonnenshein, who joined the firm in 2014 as a salesman and rose to the helm in 2021, Grayscale brought digital assets to conventional investors through its Bitcoin trust before winning a pivotal legal battle against the Securities and Exchange Commission in August 2023 to approve Bitcoin ETFs.

But even as Grayscale paved the way for a now-booming asset class, its legal victory also allowed the entry of much larger competitors such as BlackRock and Fidelity. Since the launch of Bitcoin ETFs in January, Grayscale has suffered an exodus of investor capital as its parent company, Digital Currency Group, has fought off lawsuits from the New York Attorney General and SEC.

With two decades of experience at the companies that Grayscale now counts among its rivals, Mintzberg enters with a sparkling resume and a long track record of success in traditional finance. But is he cut out to lead a firm scrambling to reinvent itself—and as an outsider in an industry that has long mistrusted those who have not come up from its own ranks?

Crypto arms race

When the brand-new Grayscale launched its Bitcoin trust in 2013, it offered something truly novel: a way for accredited investors to gain access to the cryptocurrency in the form of shares of stock, an appealing alternative to the many fly-by-night outfits selling it directly.

In 2015, the trust began trading publicly on over-the-counter markets, leading to a lucrative arbitrage opportunity for the accredited investors who got the first crack at buying new batches of GBTC—the share ticker for the Bitcoin trust. For years, these investors would buy GBTC (and later shares of equivalent trusts for assets like Ethereum) and then flip them months later at a premium to retail investors looking to get in on the crypto craze.

But because the structure of the trust also meant that investors could not redeem the shares of GBTC for the price of the underlying Bitcoin, the shares began trading at a discount in early 2021—an event that hastened the collapse of crypto firms including Three Arrows Capital and FTX the following year. Meanwhile, investors seethed as Grayscale continued to charge a hefty 2% fee.

This situation also led Sonnenshein to sue the SEC in order to force the agency to approve its long-standing petitions to offer Bitcoin in the simpler form of an ETF, which would allow the redemption of the underlying Bitcoin. A court sided with Grayscale in 2023 in a ruling hailed as a major milestone for the wildcat sector, and that resulted in Bitcoin ETFs launching in January 2024.

Despite Sonnenshein leading Grayscale to the promised land, the firm faced a litany of challenges. While new competitors including BlackRock and Fidelity set the fees on their ETFs to near-zero levels, Grayscale only lowered its fee from 2% to 1.5%—spurring a predictable stampede of investors out of its own ETF. “[Sonnenshein] had a tough role between the firm needing money and then wanting to compete in the ETF world,” said Bloomberg analyst Eric Balchunas in an interview with Fortune. “Those are two polarizing forces right there.”

As the Wall Street Journal reported, Grayscale's board and DCG began searching for a new CEO in late 2023, before the official approval of the Bitcoin ETF but after the court victory that paved the way to the launch.

According to people familiar with the matter granted anonymity to speak about confidential deliberations, the board decided to move on from Sonnenshein because it wanted a more seasoned leader for Grayscale's new phase of growth, which would see it competing with larger players such as BlackRock and Fidelity. A person familiar with Sonnenshein's thinking disputed the characterization, saying that the decision was mutual after he had reached 10 years with the firm.

"Peter brings the experience, perspective, and maturity of a seasoned C-Level executive who thrived at some of the world’s largest asset managers," said DCG CFO and Grayscale board chairman Mark Shifke in a statement shared with Fortune. "As Grayscale positions itself for its next phase of growth under Peter’s leadership, the firm has a significant advantage as the leading crypto-native asset manager."

Regulatory baggage

Despite Sonnenshein's success with the conversion, the roughly $20 billion cascading from the ETF still weighed on the firm. "That drumbeat of outflows is tough to withstand," said Balchunas. "I've never seen anything like it."

An executive at another ETF issuer, who spoke with Fortune on the condition of anonymity, said that Grayscale likely wanted a leader without the regulatory baggage of Sonnenshein, though he has never been charged with any financial wrongdoing. At a time when so-called wirehouses like Morgan Stanley are moving to let advisors recommend Bitcoin ETFs to customers, Grayscale wants its offering to be included in lists of trusted products. "They want an experienced hand that's not connected to any lingering regulatory issues," said the executive.

Steven McClurg—the chief investment officer of Valkyrie, a competitor in the digital asset ETF space that once made a bid to manage the Grayscale Bitcoin trust—told Fortune that Grayscale has been working to legitimize itself through previous hires like David LaValle, a State Street and NASDAQ vet who joined Grayscale as the global head of ETFs in 2021. Tapping Mintzberg represents the next step for the firm.

"Grayscale's got a lot of catchup work to do to be able to catch up with Invesco, BlackRock, and Fidelity," McClurg said. "There's enough hair at DCG to where they're probably in the penalty box for a couple more years."

Mintzberg's arrival

Mintzberg is joining Grayscale at a pivotal time. The firm launched two key products in recent weeks, including an Ethereum ETF and a spin-off "mini" version of its Bitcoin ETF that charges lower fees. According to a DCG letter shared with shareholders this week, Grayscale ended the second quarter with $28 billion of assets under management, representing a significant source of revenue for its parent company.

With its two flagship products now competing against similar offerings, however, Grayscale's path forward is uncertain. Rumors circulated around the time of the Bitcoin ETF launch that the firm was an acquisition target, though Grayscale's hefty price tag, and regulatory baggage, presented a steep cost to would-be buyers. One competitor, who spoke with Fortune on the condition of anonymity, said that Mintzberg's hiring could be viewed either as a commitment to make Grayscale competitive, or to improve optics and costs ahead of a potential acquisition.

Mintzberg enters as an experienced operator, having worked in strategy and investor relations roles at several firms that now offer digital asset ETFs, including BlackRock and Invesco. According to his LinkedIn, Mintzberg also led digital asset strategy at Goldman Sachs from 2021 through 2023.

He also appears to be comfortable with abrupt transitions. Last Wednesday, he put in his last day at Goldman Sachs, hours before starting his new role at Grayscale, according to a person familiar. Mintzberg declined to be interviewed for this article and has kept an unusually low profile for an incoming CEO.

"Peter is an Asset Management industry veteran with deep expertise and leadership in driving client-centric growth strategies," a Grayscale spokesperson said in a statement shared with Fortune.

A native of Brazil, Mintzberg received a grant to attend Harvard Business School in the late 1990s before starting his career as a management consultant at McKinsey.

Mintzberg worked at OppenheimerFunds when it was acquired by Invesco in 2019. Loren Starr, the former CFO of Invesco, told Fortune that Mintzberg was instrumental in helping his new company with investor relations at a time when Invesco's communication was "garbled and unclear"—a similar challenge that he will face at Grayscale, which is seeking to differentiate itself from larger and often cheaper competitors.

Along with expanding its offerings—including new products focused on AI—Balchunas said that Grayscale's main task will be harnessing relationships at institutions like wirehouses to be part of the ETF conversation. "[Sonnenshein] probably was more known as the guy running a crypto fund, versus this guy who comes in with all this wealth of TradFi experience and pedigree," he told Fortune. "If you said generate the perfect CEO for an asset manager, this would pretty much be it."