XRP News Today: Grayscale’s Digital Large Cap Fund Converts to Spot ETF on NYSE Arca

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. This decision allows the fund to list and trade on NYSE Arca, transitioning 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.

This approval marks a significant milestone for the fund, which has been tracking the CoinDesk 5 Index since its launch in 2018. The conversion allows the fund to list and trade on NYSE Arca, transitioning from a private trust to a fully regulated ETF. This change enables 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 approval was granted through an accelerated rulemaking process, which also allowed amendments to NYSE Arca’s rules to permit ETFs to 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 this threshold is breached, the fund manager must rebalance or pause trading to stay within regulatory limits. This regulatory framework ensures that the ETF remains compliant with existing securities laws and provides a stable investment vehicle for investors. Grayscale has been actively 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.” This victory paved the way for Grayscale’s Bitcoin trust to operate as an ETF with an expense ratio of 1.5%, the highest among its peers. The approval of the Digital Large Cap Fund ETF may set a precedent for future multi-asset crypto ETFs under existing exchange rules, potentially influencing other firms waiting on similar ETF proposals, such as Bitwise, Hashdex, and Franklin Templeton.

The conversion of Grayscale’s Digital Large Cap Fund into an ETF is a significant development in the crypto investment landscape. It provides investors with a regulated and transparent way to gain exposure to a diversified portfolio of digital assets. The approval also highlights the SEC’s evolving stance on crypto ETFs, which could encourage more innovation and investment in the sector. As the crypto market continues to grow, the availability of regulated ETFs like Grayscale’s Digital Large Cap Fund ETF will play a crucial role in attracting institutional and retail investors alike.