SEC Approves Grayscale Digital Large Cap Fund Conversion to Multi-Crypto ETF

• SEC approves Grayscale’s multi-crypto ETF including BTC, ETH, XRP, SOL, and ADA.
• Regulatory changes may speed crypto ETF launches via simpler S-1 filings.
• All five basket coins trade lower following the ETF approval announcement.

The U.S. Securities and Exchange Commission (SEC) has granted approval for the conversion of the Grayscale Digital Large Cap Fund into an exchange-traded fund (ETF). This approval marks the first instance of a multi-crypto basket index trading as an ETF in the United States. The newly structured ETF will include trust units representing a basket of the five largest cryptocurrencies by market capitalization: Bitcoin (BTC), Ethereum (ETH), XRP, Solana (SOL), and Cardano (ADA).

According to the SEC filing dated July 1, the ETF’s portfolio balances at the time of approval were distributed as follows: approximately 80% Bitcoin, 11% Ethereum, 4.8% XRP, 2.8% Solana, and 0.8% Cardano. Grayscale reports that the fund managed non-GAAP assets of around $775 million as of June 30.

The fund, initially launched in 2018 and traded on the OTC Markets under the ticker GDLC since 2019, will now be listed on the NYSE Arca exchange. Upon completion of operational setup, the fund will transition to continuous trading and enable on-exchange creation and redemption of shares.

Regulatory Adjustments and Surveillance

The SEC’s order includes amendments to NYSE Arca Rule 8.500-E, allowing trust units issued by limited-liability companies and recognizing index-based portfolios. The Commission confirmed that the exchange’s surveillance measures and asset-quality requirements satisfy Section 6(b)(5) of the Securities Exchange Act to prevent fraud and manipulation in the market.

The approval aligns with industry expectations surrounding the launch of the first spot Solana ETF, which may commence trading in the U.S. imminently. Other firms have also filed to expand or launch crypto index ETFs. For example, Bitwise submitted a Form 19b-4 last November to uplist its $1.3 billion Bitwise 10 Crypto Index Fund (BITW) as an exchange-traded product.

Hashdex has petitioned the SEC to add seven altcoins to its Nasdaq Crypto Index US ETF, aiming for a full conversion of its diversified trust. Franklin Templeton also filed paperwork earlier this year to introduce its own crypto index ETF.

Potential Changes in SEC Filing Requirements

In related news, the SEC is reportedly considering allowing crypto ETFs to launch without the traditional 19b-4 rule-change filing. According to a Fox Business insider, future crypto ETFs meeting specific criteria could instead submit a standard S-1 registration statement, undergo a 75-day review, and launch directly on exchanges if the tokens comply with new listing standards. This shift could accelerate the introduction of additional crypto ETFs in the U.S. market.

At the time of the SEC’s approval, all five cryptocurrencies in the Grayscale ETF basket were trading lower. Bitcoin decreased by 1% over 24 hours, Ethereum declined 2.2%, XRP dropped 0.55%, Solana fell 5.7%, and Cardano slid 4.4%.