SEC Approves Grayscale’s Digital Large-Cap Crypto Fund Conversion into Spot ETF

The U.S. Securities and Exchange Commission (SEC) has given the green light for Grayscale to convert its Digital Large-Cap Fund (GDLC) into a spot exchange-traded fund (ETF), marking a significant milestone in crypto investment products.

The newly approved ETF will track the CoinDesk Five Index, encompassing the top five cryptocurrencies by market capitalization: Bitcoin (BTC), Ethereum (ETH), XRP, Solana (SOL), and Cardano (ADA).

Bitcoin dominates the fund’s holdings with roughly 80% allocation, followed by Ethereum at over 11%, XRP near 5%, Solana at approximately 2.7%, and Cardano rounding out the portfolio with less than 1%.

Launched in early 2018, the GDLC fund has accumulated close to $755 million in assets under management. Its current expense ratio stands at 2.5%. Industry experts are optimistic about the ETF’s potential, with CoinDesk Indices’ head of product and research Andy Baehr describing the approval as a landmark moment. “This ETF will offer investors and advisors seamless exposure to the largest and most liquid digital assets in a single, regulated product,” he said, highlighting that it will be the largest multi-token crypto ETF globally.

Grayscale’s move reflects the broader maturation of the crypto investment landscape. By transitioning its private digital asset trusts into ETFs, the firm is closing the gap that once allowed investors to exploit price discrepancies between trust shares and their underlying net asset values (NAV). Historically, Grayscale’s crypto trusts faced arbitrage opportunities due to lock-up periods and redemption limitations, but converting to ETFs is expected to reduce such inefficiencies.

This approval follows a notable legal victory for Grayscale. In mid-2022, after the SEC initially rejected its application to convert the Bitcoin Trust into an ETF, Grayscale challenged the decision in court. A federal judge ruled in August 2023 that the SEC’s denial was “arbitrary and capricious,” allowing Grayscale’s Bitcoin Trust to transition into the ETF format. Today, it remains one of the priciest Bitcoin ETFs on the market, with an expense ratio of 1.5%, yet it continues to attract substantial investor interest.

Looking ahead, crypto asset manager Bitwise is reportedly awaiting SEC approval to similarly convert its Bitwise 10 Crypto Index Fund into an ETF. Bitwise’s fund holds a diversified basket of cryptocurrencies, including Bitcoin, Ethereum, XRP, Solana, Cardano, and additional tokens such as Sui, Chainlink, Avalanche, Litecoin, and Polkadot.