Grayscale Makes Biggest Crypto ETF Push With XRP in Focus

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As a seasoned analyst with over two decades of experience in the financial industry, I’ve seen my fair share of market shifts and regulatory changes. The recent move by Grayscale to convert its Digital Large Cap Fund into a spot ETF is, in my opinion, a smart strategic decision that could significantly expand market access for crypto assets, particularly XRP.

Investment giant Grayscale has submitted a substantial application to the Securities and Exchange Commission (SEC). As reported by James Seyffart, an analyst specializing in ETFs at Bloomberg’s X, this filing aims to transform the Grayscale Digital Large Cap Fund (GDLC) into a direct ETF. One of the main tokens included in the fund is Ripple (XRP).

Conversion to ETF could expand market access

In simpler terms, this action indicates that Grayscale aims to change their existing fund format into an Exchange-Traded Fund (ETF). If accepted, this proposal would enable the financial company to deal with the product on the trading floor of the New York Stock Exchange (NYSE).

Among other significant components, the Grayscale mixed-crypto fund also incorporates tokens such as Bitcoin, Ethereum, Solana, and Avalanche. By doing so, it broadens the reach of these digital currencies to potential investors who might find them more approachable.

Grayscale’s GDLC, managing assets worth $534 million, is currently traded on the over-the-counter market. As a closed-end fund, it offers investors an opportunity to invest in a range of large-cap cryptocurrencies. Unlike other funds, closed-end funds do not trade based on their Net Asset Value (NAV). Instead, their trading value is determined by supply and demand in the market.

Filing for a conversion into an Exchange-Traded Fund (ETF) could enable Grayscale to trade the fund’s shares more closely to their net asset value (NAV), offering investors increased liquidity, transparency, and access. ETFs are generally more regulated than closed-end funds, making them a more appealing choice for institutional investors as well.

XRP’s inclusion heightens pressure on SEC

According to what’s posted on Grayscale’s website, the Digital Large Cap Fund (GDLC) is mainly composed of Bitcoin (76%) and Ethereum (18%), making up about 94% of the entire fund. This new filing indicates that Grayscale continues to work on broadening its investment options.

By listing XRP in their documents, the entity increases the scrutiny from the Securities and Exchange Commission (SEC), given the ongoing legal battle between the SEC and Ripple Labs Inc., the organization associated with XRP. Consequently, the SEC will be compelled to clarify its position regarding XRP.

Furthermore, the SEC needs to review applications for crypto ETFs, including those for an ETF based on XRP, which Bitwise became the first to file for at the start of the month. Now, Canary Capital, a firm from Nashville led by alternative asset manager Valkyrie, has also submitted an application for an XRP-based ETF.

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2024-10-16 15:39