The U.S. Securities and Exchange Commission (SEC) has approved the conversion of the Grayscale Digital Large Cap Fund into a fully regulated Grayscale Crypto Index ETF. This is the first crypto index ETF to list on NYSE Arca; allowing traditional investors to get diversified exposure to five major cryptos in one product.
According to the July 1 SEC filing; the ETF’s portfolio includes BTC, ETH, XRP, SOL, and ADA, with weightings at launch: 80% Bitcoin, 11% Ethereum, 4.8% XRP, 2.8% Solana, and 0.8% Cardano. Grayscale’s fund, which has traded on OTC Markets under the ticker GDLC since 2019; will now move to continuous on-exchange trading, including daily creation and redemption of units.
Why Has the SEC Approved This?
The SEC stated in its order that NYSE Arca’s updated surveillance and compliance frameworks met the requirements of Section 6(b)(5) of the Exchange Act, specifically around fraud prevention, market manipulation, and investor protection. The accelerated order also amended Rule 8.500-E; allowing limited liability structures to issue Trust Units and recognizing index-based digital asset portfolios.
Grayscale’s index ETF was ready for approval due to its long history; transparent pricing model and passive exposure to established cryptocurrencies. The fund’s $775 million in assets under management (as of June 30) makes it institutional grade.
This also clears Solana, XRP and Cardano as components of U.S. regulated financial instruments even though each has been scrutinized by regulators in the past.
Solana, XRP and Cardano Approved for Spot ETF Inclusion
The SEC approval of this product clears Solana, XRP and Cardano for spot trading in ETFs, a big news for investors and other asset managers looking at altcoin funds. Solana’s ETF is pending and XRP’s legal clarity has improved after recent court decisions.
Analysts think Solana could be next in line for a spot ETF and rumors are circulating about a launch this week. XRP survived major regulatory hurdles and this listing reinforces its eligibility in regulated products.
Index ETFs Spark Broader Race Among Asset Managers
Now that Grayscale has won, others are moving fast to get approval for similar products. Bitwise filed a Form 19b-4 in November to uplist its $1.3 billion Bitwise 10 Crypto Index Fund (BITW). That is still under review but the latest Grayscale standard should speed up the process.
Hashdex and Franklin Templeton have also stepped up. Hashdex is asking to expand its Nasdaq Crypto Index US ETF to include 7 additional altcoins and convert its entire diversified trust. Franklin Templeton filed in February to launch its own crypto index ETF and move existing basket assets into a more liquid and compliant format. If approved these new products will join the Grayscale Crypto Index ETF.
The approval of the Grayscale Crypto Index ETF is an important outlook in how digital assets are accessed in traditional markets. No more navigating volatile spot markets or dealing with complex custody and private keys. Retail and institutional investors can now invest in a professionally managed, diversified crypto basket through a standard brokerage.
Market Inflows and Investor Confidence
Timing is everything. CoinShares data shows over $2.7 billion in crypto fund inflows last week with Bitcoin still leading but Ethereum and other altcoins gaining share. Ethereum saw $429 million in new capital and Solana $91 million which could rise now that it’s listed in an ETF.
As of today, there are over 70 crypto ETFs pending with the SEC covering various asset combinations, staking variations and derivatives. The Grayscale Crypto Index ETF could be the model others follow especially for firms looking to get approved without taking on the perceived regulatory risk of individual altcoin ETFs.
Conclusion
The SEC approval of the Grayscale Crypto Index ETF is a regulatory achievement and opens up digital assets to more investors. With Solana, XRP and Cardano now in a compliant ETF, the SEC is expected to continue to support diversified crypto funds.
This validates new structures and compliance models that others like Bitwise and Hashdex will follow. For investors, it’s one step closer to a world where regulated multi-asset crypto products are as easy to access as traditional equity ETFs.
Summary
The SEC has approved the Grayscale Crypto Index ETF, converting the Grayscale Digital Large Cap Fund into a multi-crypto ETF trading on NYSE Arca. This is the first time Bitcoin, Ethereum, XRP, Solana and Cardano have been in a US regulated index fund. The approval paves the way for other asset managers like Bitwise and Hashdex to convert their funds into ETFs.
FAQs
What is the Grayscale Crypto Index ETF?
The converted version of Grayscale’s Digital Large Cap Fund, now approved to trade on NYSE Arca as an ETF of Bitcoin, Ethereum, XRP, Solana and Cardano.
Why is this important?
First SEC approved multi-crypto ETF, more regulatory comfort with basket crypto products and clearing altcoins like Solana and XRP for ETF use.
What are the current allocations?
At launch: 80% Bitcoin, 11% Ethereum, 4.8% XRP, 2.8% Solana, 0.8% Cardano.
Are other firms launching similar crypto index ETFs?
Yes. Bitwise, Hashdex and Franklin Templeton have filings to launch or expand index based crypto ETFs.
Glossary
ETF (Exchange-Traded Fund) – A type of investment fund traded on stock exchanges, like stocks.
Digital Asset Index – A financial product tracking a group of cryptocurrencies by market cap or theme.
Form 19b-4 – An SEC filing to list a new financial product on a US exchange.
NYSE Arca – A US exchange for ETFs and equities.
Spot ETF – An ETF backed by actual holdings of the underlying asset, not derivatives or futures.
Sources
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