SEC approves Grayscale ETF, greenlights trading for SOL, XRP, ADA

Grayscale Asset Management has just received approval from the Securities and Exchange Commission (SEC) to convert the Digital Large-Cap Fund into an exchange-traded fund (ETF).

This fund includes the five largest cryptocurrencies by market capitalization. The current portfolio structure is as follows:

• Bitcoin (BTC): 80.2%
• Ethereum (ETH): 11.3%
• Solana (SOL): 2.7%
• XRP: 4.8%
• Cardano (ADA): 0.81%

In the past, investors often took advantage of the arbitrage opportunities between the trading price and the net asset value NAV of Grayscale's cryptocurrency trusts — particularly due to the influence of the lock-up period and the restriction on redeeming assets in an "in-kind" manner. However, as Grayscale gradually converts these trusts into ETFs, the arbitrage opportunities are becoming increasingly limited.

Grayscale stated in a notice sent to the SEC:

"The investment objective of the fund is to have the stock price reflect the value of the digital assets held, according to the weight and index price of each type in the portfolio, after deducting the expenses and financial obligations of the fund."

As one of the pioneering entities providing cryptocurrency investment products through traditional financial instruments, Grayscale's transition to the ETF model marks the end of an era and a significant turning point for the digital currency industry.

In June 2022, Grayscale filed a lawsuit in court after the SEC rejected their application to convert their Bitcoin Trust fund into an ETF. By August 2023, the federal court ruled that the SEC had acted "arbitrarily and capriciously" and approved Grayscale's request.

Currently, the Grayscale Bitcoin Trust has been listed as an ETF with a management fee of up to 1.5% — the highest among Bitcoin ETF funds on the market, and also the fund with the highest revenue in the Bitcoin investment sector.

Moreover, this move opens the door for other cryptocurrency basket funds to be converted into ETFs.

Bitwise submitted Form 19b-4 in November to list the Bitwise 10 Crypto Index Fund (BITW) valued at $1.3 billion as a trading product on the exchange. Hashdex has also requested the SEC to expand the scope of the Nasdaq Crypto Index US ETF to include an additional seven altcoins, a move that they say will lead to the complete conversion of the current diversified trust fund into an ETF.

Franklin Templeton also filed in February to launch its own cryptocurrency index ETF, facilitating the conversion of existing basket assets to a tradable form on the exchange once approved.

Thach Sanh