SEC approves conversion of Grayscale’s crypto large-cap fund to an ETF

The U.S. Securities and Exchange Commission has approved Grayscale’s request to convert its Digital Large Cap Fund into a spot exchange-traded fund.

According to a July 1 SEC filing, approval allows the fund to list and trade on NYSE Arca, marking its transition from a private trust into a fully regulated ETF. The fund tracks the CoinDesk 5 Index, which includes Bitcoin (BTC), Ethereum (ETH), XRP (XRP), Solana (SOL), and Cardano (ADA). 

At the time of the SEC’s approval, the fund was composed of approximately 80.2% Bitcoin, 11.4% Ethereum, 4.8% XRP, 2.8% Solana, and 0.8% Cardano. The assets are valued daily based on CoinDesk reference rates and rebalanced quarterly.

Grayscale’s Digital Large Cap Fund was first launched in 2018 and has traded over the counter under the ticker GDLC since 2019. The newly approved ETF structure allows for daily creation and redemption of shares in baskets of 10,000, settled in cash through authorized participants. The fund calculates its net asset value at 4:00 p.m. ET each business day.

The SEC approved the change through an accelerated rulemaking process. It also allowed amendments to NYSE Arca’s rules to let ETFs be structured as limited liability companies and based on index-tracked portfolios.

To meet regulatory standards, at least 85% of the fund’s assets must consist of digital assets already backing SEC-approved exchange-traded products. If that threshold is breached, the fund manager must rebalance or pause trading to stay within regulatory limits.

Grayscale has been working to convert several of its crypto trusts into ETFs. The firm won a legal battle in 2023 after a federal judge ruled that the SEC’s previous rejection of its Bitcoin ETF application was “arbitrary and capricious.” It’s Bitcoin trust now operates as an ETF with an expense ratio of 1.5%, the highest among its peers.

The approval comes as other firms wait on similar ETF proposals. Bitwise, Hashdex, and Franklin Templeton have all submitted filings to convert or launch diversified crypto funds. Grayscale’s latest approval may help set a framework for future multi-asset crypto ETFs under existing exchange rules.