XRP News: SEC Likely to Approve Grayscale’s $760 Million Multi-Asset Crypto ETF

The U.S. Securities and Exchange Commission (SEC) is on the cusp of a crucial decision this week surrounding Grayscale Investments’ request to transform its $760 million Digital Large Cap Fund (GDLC) into a spot exchange-traded fund (ETF). This move has the potential to introduce U.S. investors to XRP, Solana, and Cardano under regulatory oversight for the first time.

Nate Geraci, president of The ETF Store, expressed confidence in the SEC’s likely approval of the conversion. The SEC is set to make a decision by July 2 after reviewing Grayscale’s amended Form S-3 filing. Currently, GDLC consists of 80.8% Bitcoin and 11.1% Ethereum, with XRP, Solana, and Cardano making up a mere 8.1% of the fund. Geraci sees this modest exposure to altcoins as a cautious approach by the SEC to explore multi-asset crypto ETFs while managing investor risk related to perceived volatility and liquidity issues.

This strategy reflects the SEC’s gradual stance on crypto regulation. After a court ruling in favor of the SEC, spot Bitcoin ETFs were greenlit in January 2024, followed by spot Ethereum ETFs seven months later. Therefore, industry experts view Grayscale’s GDLC—featuring limited exposure to other digital assets—as a logical next step in this regulatory progression.

The SEC’s willingness to approve diversified portfolios in traditional finance further supports this argument. Since February, the SEC has allowed ETFs to have up to 15% exposure to illiquid private-credit instruments, as long as appropriate risk management measures are in effect. Geraci believes there is no logical reason why the SEC couldn’t allow a 10% allocation to crypto assets besides Bitcoin and Ethereum, highlighting the current regulatory inconsistency.

Grayscale has been actively engaging with regulators, evidenced by its recent filing updates on June 26, which covered custody, index methodology, and fund mechanisms. Bloomberg Intelligence analysts James Seyffart and Eric Balchunas echoed Geraci’s confidence, boosting their approval odds for GDLC to 90%. According to Seyffart, a rejection would require the SEC to establish a new crypto ETF framework or explain why an 8% exposure to non-BTC/ETH assets is deemed too risky.

If approved, GDLC would be the first U.S. spot ETF to offer regulated exposure to XRP, Solana, and Cardano directly. Beyond the immediate implications, this approval would grant the SEC access to real-time trading and redemption data, setting the stage for individual ETFs for these altcoins next year.

With the decision deadline approaching, investors and observers are eagerly awaiting the outcome expected by the end of the week. Approval of a multi-asset ETF encompassing XRP, Solana, and Cardano would signify a significant milestone for the cryptocurrency sector. This type of ETF would provide investors with diversified exposure to these three leading digital assets, which have shown promise in terms of performance and growth potential. Additionally, including these cryptocurrencies in an ETF would enhance their credibility and accessibility, potentially drawing a broader investor base, including those previously hesitant due to market volatility and regulatory uncertainties.

While a multi-asset ETF approval is not guaranteed and regulatory obstacles remain, expert predictions imply a changing regulatory landscape more conducive to cryptocurrencies. This shift could facilitate the approval of additional ETFs in the future, signaling a positive trend for the industry.