Grayscale Gains Approval for First Crypto Mutual Fund

The SEC has approved Grayscale’s multi-asset crypto exchange-traded product, Digital Large Cap Fund (GDLC)—the crypto world’s first equivalent of a mutual fund. Unlike earlier products that invested solely in bitcoin or ether, Grayscale’s fund offers a diversified basket of cryptocurrencies, including XRP, Solana, and Cardano.

This approval comes after a long period in which numerous digital asset funds were stalled in regulatory backlogs. It has been more than a year since Grayscale first sought permission to convert its over-the-counter fund into an ETP. 

New Generic Listing Standards

In addition to this specific approval, the SEC also approved rule changes proposed by the three national securities exchanges to establish generic listing standards for exchange-traded products that hold digital assets.

“The generic listing standards allows exchanges to list commodity-based ETPs and ETFs holding crypto without requiring individual agency reviews for each fund,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “This will significantly streamline the process, which used to take up 240 days. It will reduce barriers to accessing digital asset products in the U.S., and we will likely see additional financial products based on the ETPs and ETFs, such as options.”

A Logjam for Approval

The crypto fund industry began in January 2024, when the SEC approved 11 funds invested in bitcoin.

That was followed a few months later by approval of five ether-based funds. Grayscale was part of the inaugural class of vehicles for both assets.

Momentum then stalled as the SEC was slow to approve funds holding other forms of crypto. As of last month, 92 different crypto funds were still awaiting approval, many of them tied to lesser-known assets like Avalanche and Bonk. Grayscale was among them and still hopes to convert its Chainlink Trust into an ETF.

Because GDLC is diversified across several different assets—including bitcoin and ether—it may give individual investors more confidence in its relative stability. The concept of crypto mutual funds has been around for some time, but they may take a while to fully mature.

“It definitely marks a milestone for the industry, but we’re pretty stretched this cycle,” said Hugentobler. “We won’t really know how much of a success this will be until after the bear market portion of the cycle and see how it rebounds with volumes and flows.”