Grayscale Seeks to Convert Multi-Crypto Fund to ETF, Including Solana and XRP

TLDR:

• Grayscale Investments filed to convert its Digital Large Cap Fund into an ETF
• The fund includes Bitcoin, Ethereum, Solana, XRP, and Avalanche
• This move follows Grayscale’s successful conversions of Bitcoin and Ethereum Trusts to ETFs
• Other firms like Canary Capital and Bitwise have also filed for crypto ETFs
• The SEC’s response to these multiple filings is yet unclear

Grayscale Investments, the crypto industry’s largest asset manager, has taken a significant step in the evolving landscape of cryptocurrency investment products.

The firm has filed an application with the United States Securities and Exchange Commission (SEC) to convert its Digital Large Cap Fund into an exchange-traded fund (ETF).

The Digital Large Cap Fund, which currently includes Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP, and Avalanche (AVAX), aims to provide investors with exposure to a basket of major cryptocurrencies. This move comes on the heels of Grayscale’s successful conversions of its Bitcoin Trust and Ethereum Trust into spot ETFs earlier this year.

Grayscale’s application, submitted via a 19b-4 form filed by the New York Stock Exchange on its behalf, represents a continuation of the firm’s efforts to broaden access to cryptocurrency investments through regulated, traditional financial products.

The Digital Large Cap Fund is designed to track the performance of the top 20 digital assets by market capitalization, with Bitcoin holding the largest weighting, followed by Ethereum.

This latest filing occurs against a backdrop of increasing interest in crypto-based ETFs. Recently, other investment firms have made similar moves.

Canary Capital filed for a Litecoin ETF, emphasizing the cryptocurrency’s long-running blockchain and potential for enterprise-grade use cases. Additionally, both Canary Capital and Bitwise have submitted applications for XRP ETFs.

The growing number of ETF applications suggests a rising demand from institutional investors on Wall Street for more diverse cryptocurrency exposure. Nate Geraci, President of ETF Store, has noted this trend, indicating a broader appetite for crypto-based investment products beyond Bitcoin and Ethereum.

Grayscale’s move is particularly noteworthy given the regulatory landscape. The SEC has previously expressed concerns about certain cryptocurrencies, including Solana, which it has alleged to be an unregistered security.

However, the regulator’s stance has shown signs of evolution, as evidenced by its recent approval of Ethereum ETFs after initial reluctance.

The firm’s approach to this conversion mirrors its successful strategy with the Bitcoin Trust conversion. Grayscale won a lawsuit against the SEC last year, which helped pave the way for the approval of crypto ETFs in the United States. The court ruled that the SEC lacked a coherent explanation for denying the proposed conversion of Grayscale’s Bitcoin Trust to an ETF.

If approved, the conversion of the Digital Large Cap Fund to an ETF would offer investors a new way to gain exposure to a diversified portfolio of major cryptocurrencies through a regulated investment vehicle. This could potentially increase liquidity and accessibility for investors interested in the crypto market.

However, the SEC’s response to these multiple filings remains uncertain. The regulatory body has yet to acknowledge the XRP ETF filings from Bitwise and Canary Capital, and its approach to funds including a mix of different cryptocurrencies is unclear.

Grayscale has stated that this filing reflects their commitment to making the crypto asset class more accessible to all investors.

The fund, currently trading under the ticker GDLC, aims to meet the growing demand for diversified exposure to crypto through a portfolio of market-leading digital assets.