SEC Approves Conversion of Grayscale’s Large-Cap Crypto Fund into ETF

Key Takeaways

• The SEC has approved Grayscale’s conversion of its Digital Large-Cap Fund into an exchange-traded fund (ETF).
• The fund holds the five largest cryptocurrencies by market cap, with Bitcoin making up 80.2% of the portfolio.
• The move signals the diminishing arbitrage opportunities previously available in Grayscale’s crypto trusts.
• Grayscale’s legal battle with the SEC ended with the court siding in favor of Grayscale’s Bitcoin trust conversion.
• This approval marks a step forward in the maturation of the crypto investment industry.

SEC Greenlights Grayscale’s Transition to ETF

In a significant move for the crypto investment space, the US Securities and Exchange Commission (SEC) has approved Grayscale’s Digital Large-Cap Fund conversion into an exchange-traded fund (ETF). This approval marks the latest development in Grayscale’s long-standing efforts to convert its cryptocurrency trusts into ETF structures, reducing arbitrage opportunities that have historically existed due to pricing discrepancies between trust shares and the underlying assets.

The fund, now officially rebranded as an ETF, holds the five largest cryptocurrencies by market capitalization as per the CoinDesk Five Index. Bitcoin (BTC) remains the dominant asset, representing 80.2% of the portfolio. Other cryptocurrencies in the fund include Ether (ETH) at 11.3%, Solana (SOL) at 2.7%, XRP (XRP) at 4.8%, and Cardano (ADA) at 0.81%.

Reduction of Arbitrage Opportunities

One of the key changes with the ETF conversion is the end of the arbitrage opportunities that were once common with Grayscale’s crypto trusts. These opportunities arose from differences between the net asset value (NAV) of the funds and their market trading prices. The previous absence of in-kind redemptions, combined with the lock-up periods, allowed savvy investors to exploit these price discrepancies.

With the transition to an ETF, the fund’s value now directly reflects the prices of the underlying assets, less expenses and liabilities, making the pricing more transparent and reducing the window for arbitrage.

Legal Battle Paves the Way

Grayscale’s journey to ETF status was not a smooth one. In June 2022, the company petitioned the SEC for permission to convert its Bitcoin Trust into an ETF. The SEC initially denied the request, citing concerns over market manipulation and investor protection. However, in August 2023, a US judge ruled in favor of Grayscale, finding that the SEC’s denial was “arbitrary and capricious” and allowing Grayscale to move forward with its Bitcoin ETF.

This landmark legal victory set the stage for further approval of Grayscale’s crypto funds, including the recent Digital Large-Cap Fund ETF conversion.

What Has Happened So Far

• June 2022: Grayscale petitions SEC to convert its Bitcoin trust into an ETF, after SEC denies the application.
• August 2023: US court rules in favor of Grayscale, calling the SEC’s denial “arbitrary and capricious.”
• May 2025: Grayscale wins approval for the Digital Large-Cap Fund to be converted into an ETF.
• July 2025: Grayscale’s Bitcoin ETF launches and becomes the most expensive Bitcoin ETF in the market.

A Step Toward Maturity in the Crypto Industry

The approval of Grayscale’s ETF represents a milestone in the maturation of the cryptocurrency investment industry. It signals a shift from private trusts and high-fee products to more regulated, accessible financial vehicles. Grayscale’s Bitcoin ETF now boasts the highest expense ratio among Bitcoin ETFs at 1.5%, and it has rapidly become one of the highest-grossing BTC investment vehicles.

Institutional and retail investors are seeking regulated, transparent, and liquid crypto investments. Grayscale’s ETF approval could drive more mainstream adoption of cryptocurrency.