SEC Approves Grayscale Digital Fund ETF Conversion

The Securities and Exchange Commission approved the conversion of the Grayscale Digital Large Cap Fund LLC (GDLC) to an exchange-traded fund, expanding crypto ETF options beyond single-asset Bitcoin and Ethereum products.

The SEC granted accelerated approval Monday for the fund to trade on NYSE Arca under amended Trust Units rules, according to the filing. The fund tracks the CoinDesk 5 Index and holds five digital assets with Bitcoin comprising 80.4% of holdings, according to Grayscale.

Grayscale Approval Signals Growing Acceptance

The approval signals growing regulatory acceptance of multi-asset crypto ETFs, with the fund structured to meet SEC requirements by holding primarily assets the commission has already approved for ETF use, according to the filing.

Ethereum accounts for 11.2% of fund holdings, while XRP represents 4.8%, Solana 2.9% and Cardano 0.8%, according to Grayscale data as of July 1. The fund generated 113.2% returns over one year and 699.2% cumulative returns since inception in 2018.

The SEC filing shows the fund must maintain at least 85% of its components in commodities that underlie Commission-approved ETPs, with no more than 15% in non-approved assets. Trading will halt if the fund falls below the 85% threshold until rebalancing occurs, according to the filing.

Grayscale Investments Sponsors manages the fund, which uses Coinbase Custody Trust Company as custodian, according to the filing. The fund carries a 2.5% annual management fee with no performance fees, according to Grayscale.

GDLC began public trading in 2019 after launching in 2018, according to the firm. Assets under management totaled $754.7 million as of July 1, with more than 15.8 million shares outstanding.

Fund Expands Crypto ETF Market

The approval marks a step forward for diversified crypto ETFs in the U.S. market. Until recently, U.S. investors seeking crypto exposure through ETFs were limited to single-asset products.

That changed in February when Hashdex launched the first multi-asset spot crypto ETF for U.S. investors with its Nasdaq Crypto Index US ETF (NCIQ), which currently holds Bitcoin and Ethereum. The SEC approval of Grayscale's fund marks another step toward broader crypto diversification in ETF form.

"The anticipated approval of GDLC's conversion to an ETF is a pivotal moment for the digital asset ecosystem and reflects meaningful progress toward enabling diversified, index-based strategies," Samir Kerbage, chief investment officer at Hashdex, said in a statement.

Nasdaq has an open filing with the SEC that would permit the NCIQ ETF to include up to seven additional crypto assets, including XRP, Solana, Cardano, Chainlink, Stellar, Litecoin and Uniswap.