Grayscale Seeks SEC Approval for Multi-Crypto ETF Conversio

  • Grayscale files to convert its Digital Large Cap Fund into a spot crypto ETF with the SEC.

  • GDLC fund holds 76% BTC, 18% Ether, and smaller allocations to Solana, XRP, and Avalanche.

  • SEC’s stance on non-Bitcoin and non-Ether assets may affect Grayscale’s ETF conversion.

Grayscale Investments has filed a request with the U.S. Securities and Exchange Commission (SEC) to convert its multi-crypto Digital Large Cap Fund (GDLC) into a spot crypto exchange-traded fund (ETF). The New York Stock Exchange (NYSE) submitted this filing on Grayscale’s behalf on October 14. If approved, it would mark Grayscale’s first multi-crypto ETF, allowing investors access to a variety of digital assets in a single fund. This request sets the stage for Grayscale to expand its offerings beyond individual crypto assets.

Fund Breakdown and Liquidity Advantages

The GDLC fund is heavily invested in Bitcoin, with 76% of its assets allocated to it. Ether makes up 18%, while smaller portions include solana, XRP, and avalanche. At the time of the filing, the fund had $524 million in assets under management. The shift to an ETF structure could make the fund easier to trade. Unlike closed-end funds, ETFs can create or redeem shares as demand changes. This flexibility ensures the fund’s price closely follows its Net Asset Value (NAV), which helps investors trade at fairer prices without large premiums or discounts.

Grayscale’s Previous Conversions 

Grayscale has converted other funds into ETFs, including the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE). However, these conversions did not prevent large outflows. GBTC saw $20 billion leave the fund after its conversion, and ETHE experienced $3 billion in outflows. While ETFs generally offer more liquidity, these outflows suggest that investors have not responded as favorably to Grayscale’s conversions as expected.

Regulatory and Political Considerations

The SEC’s view on crypto assets other than Bitcoin and Ether remains uncertain. Recent lawsuits have classified several assets, including XRP, Solana, and Avalanche, as securities. This classification could complicate Grayscale’s request. The inclusion of these assets in the GDLC fund may face additional scrutiny from regulators.

There may also be a part to play by the political environment. The full move has attracted speculations including Grayscale which is pulling the move with an eye set for the upcoming U.S presidential election. Should the Republican candidate Donald Trump clinch victory and succeed in implementing his word to fire SEC Chair Gary Gensler, then the effects will be pronouncedly more constructive for cryptocurrencies. Grayscale and other issuers might be preparing for such a change, but the approaches of the SEC to broader crypto assets are still unknown.

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