SEC Begins Review of NYSE Arca Proposal to Uplist Grayscale Digital Fund to ETP

The U.S. Securities and Exchange Commission (SEC) officially began reviewing an application to convert Grayscale's Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF) on a national securities exchange on November 4.

As outlined in Grayscale’s update, the SEC's announcement marks the start of a 240-day review process for NYSE Arca’s filing.

Grayscale and NYSE Arca Initiate Process for Multi-Crypto Exchange-Traded Product Approval

Grayscale filed to convert its fund into an ETF on October 16, following a similar NYSE filing.

Grayscale Digital Large Cap Fund (Ticker: $GDLC,) Application to Uplist as Exchange-Traded Product Now Published in Federal Register.

GDLC is publicly traded and holds #Bitcoin, #Ether, $SOL, $XRP, $AVAX

Read the Press Release: https://t.co/bOsp3k2MAt

— Grayscale (@Grayscale) November 4, 2024

The proposed rule change under NYSE Arca Rule 8.800-E would be the first of its kind. It would enable a regulated national securities exchange to list and trade shares of multi-crypto asset ETPs, expanding the range of eligible assets beyond Bitcoin and Ether.

As part of the regulatory framework, funds listed as diversified basket indices must allocate at least 90% of their holdings to assets with established markets, such as Bitcoin and Ether, while permitting up to 10% in other digital assets.

According to the CoinDesk Large Cap Select Index (DLCS), as of November 1, 2024, GDLC held over $530 million in assets, including Bitcoin (76.53%), Ether (16.92%), Solana (4.36%), XRP (1.63%), and Avalanche (0.56%).

Currently trading on OTC Markets under the ticker GDLC, the fund offers diversified exposure to the crypto market.

"With this rule change, we aim to bring multi-crypto ETPs into the U.S. regulatory framework and continue delivering client-focused, future-forward solutions," David LaValle, Grayscale's Global Head of ETFs, said.

GDLC was launched initially as a private placement in 2018, began public trading in 2019, and became an SEC reporting entity in 2022.

Grayscale's investment products include diversified thematic funds, such as the Grayscale Decentralized AI Fund, and a variety of single-asset trusts that provide exposure to individual digital assets.

Grayscale Crypto Index Fund Stands Out with Diverse Asset Holdings, Sparks ETF Race

Unlike other crypto index funds, Grayscale's fund tracks a basket of alternative cryptocurrencies through the CoinDesk Large Cap Select Index and holds five digital assets.

Competing funds from asset managers like Hashdex and Franklin Templeton are initially focused on Bitcoin and Ether only.

Industry analysts predict that crypto index ETFs, offering diversified exposure similar to the S&P 500 for traditional stocks, will be the next major trend after listing Bitcoin and Ether ETFs earlier this year.

Eric Balchunas, a Bloomberg ETF analyst, suggested that the outcome of the U.S. presidential election could influence crypto regulation.

He noted that a Trump victory might lead to a more crypto-friendly SEC, potentially advancing crypto ETF approvals, while a Harris win could slow such progress.

Several crypto product proposals are underway. For example, Canary Capital and Bitwise recently filed for XRP ETFs, and Canary also filed for a spot Litecoin ETF on October 15.

This surge in filings reflects a growing demand for crypto investment vehicles that could expand access for retail and institutional investors.

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