SEC Greenlights Grayscale's Digital Large Cap Fund Conversion to Spot ETF

The U.S. Securities and Exchange Commission (SEC) has authorized Grayscale Investments' proposal to transform its Digital Large Cap Fund into a spot exchange-traded fund (ETF). According to a July 1 regulatory filing, the approved conversion enables the fund's listing on NYSE Arca, transitioning it from a private trust to a fully regulated ETF structure.

The fund tracks the CoinDesk 5 Index, comprising Bitcoin (BTC, 80.2%), Ethereum (ETH, 11.4%), XRP (4.8%), Solana (SOL, 2.8%), and Cardano (ADA, 0.8%) as of approval date. Asset valuations utilize CoinDesk reference rates with quarterly rebalancing.

Originally launched in 2018 and trading OTC under ticker GDLC since 2019, the newly approved ETF adopts a creation/redemption mechanism processing 10,000-share baskets through cash settlements via authorized participants. Daily NAV calculations occur at 4:00 p.m. ET.

The SEC utilized an accelerated approval process, simultaneously permitting NYSE Arca rule amendments for LLC-structured ETFs tracking indexed portfolios. Regulatory compliance mandates ≥85% of assets derive from SEC-approved ETP components, triggering rebalancing or trading pauses if violated.

This landmark approval follows Grayscale's 2023 legal victory overturning the SEC's prior Bitcoin ETF rejection as "arbitrary." The firm's Bitcoin Trust currently operates as an ETF with a 1.5% expense ratio - the industry's highest. The decision establishes precedent for pending diversified crypto ETF applications from Bitwise, Hashdex, and Franklin Templeton.