In a noteworthy progression within the financial landscape, the United States Securities and Exchange Commission (SEC) has officially initiated the review of Grayscale’s 19b-4 filing concerning its Digital Large Cap Fund. This pivotal move is a step forward in Grayscale’s strategic plan to transform this fund into an Exchange-Traded Fund (ETF), marking a significant moment for the asset manager and the broader cryptocurrency market.
SEC Acknowledges Grayscale’s 19b-4 Application
Grayscale, a leading asset management firm in the digital currency sector, announced that the SEC has published NYSE Arca’s 19b-4 filing to list and trade its Digital Large Cap Fund as an Exchange-Traded Product (ETP) in the Federal Register. This development follows Grayscale’s submission of the application approximately two weeks prior, indicating a momentous step towards the potential conversion of the fund into an ETF.
The firm’s press release highlighted, “Grayscale and NYSE Arca have taken a thoughtful approach toward developing a proposed ruleset to permit the listing and trading of shares of multi-crypto asset ETPs within the SEC’s existing standard. We look forward to engaging constructively with regulators, as we seek to bring digital assets further into the U.S. regulatory perimeter and deliver for our clients.”
Under the proposed structure, the fund would need to allocate at least 90% of its investments into commodities with an established surveillance or futures market, such as Bitcoin and Ether. The remaining 10% could be allocated to other assets. This proposal, if sanctioned, would be advantageous for the Grayscale Digital Large Cap Fund (GDLC), which aligns with the CoinDesk Large Cap Select Index (DLCS) and diversifies its holdings in significant digital assets on a quarterly basis.
As of November 1, GDLC boasts over $530 million in assets under management, comprising major cryptocurrencies like Bitcoin, Ethereum, Solana, XRP, and Avalanche, proportioned according to their market capitalizations. The SEC’s review process, which can extend up to 240 days, will determine whether the application is approved, heralding a new era where multi-crypto asset ETPs could be listed and traded on a national securities exchange.
Why Is This Development Significant?
The filing by Grayscale and NYSE Arca is groundbreaking as it endeavors to redefine how the exchange categorizes ETPs that incorporate both commodities and digital assets, expanding beyond the realm of Bitcoin and Ethereum. This step is crucial as it represents the first instance where the SEC will consider a filing that does not solely focus on the two largest cryptocurrencies by market capitalization.
Given the SEC’s often debated stance on the security status of cryptocurrencies, except for Bitcoin and Ethereum, the outcome of this application could provide fascinating insights into the regulatory body’s perspective on broader digital asset inclusion.
Spotlight on SOL and XRP ETFs
The SEC’s decision is also keenly awaited on other ETF applications, including those submitted by Van Eck and 21Shares for Spot Solana ETFs, as well as XRP ETF filings from Bitwise and Canary Capital. Notably, 21Shares recently entered the fray by submitting their form S-1 for an XRP ETF with the SEC, underscoring the growing interest and competition in the digital asset ETF space.
These developments are pivotal as they could potentially reshape the landscape of digital asset investment, offering new opportunities and challenges for investors and regulatory bodies alike.
