Giant cryptocurrency manager Grayscale has been approved by his Digital Large Cap Fund – which includes six major cryptocurrencies – to file key regulatory forms with the US Securities and Exchange Commission. In addition, Grayscale will seek to make its Litecoin, ETH Classic and Bitcoin Cash funds also registered with the SEC, the company’s lawyer said.
Digital Large Cap Fund is a registered company with the SEC
In May, Grayscale filed a proposal to turn the Large Cap into a SEC reporting company, with key implications. One is that it will allow wealthy investors who buy the fund’s shares to liquidate those shares in the retail market for a period of six months instead of twelve. And, according to Grayscale’s vice president of legal affairs, Craig Salm, registered company status can provide the necessary guarantee to some conservative investors and firms that would not otherwise be affected by the cryptocurrency.
While the Large Cap Fund was already subject to certain SEC obligations, the new designation means that the fund must now file standard quarterly and annual reports. Grayscale took the same measures for its BTC and ETH funds last year. The Digital Large Cap Fund holds BTC, ETH, LTC, BCH, LINK and ADA.
Grayscale is a subsidiary of Barry Silbert’s Digital Currency Group and is a major player in cryptots and manages tens of billions in assets. The company has found a loophole by offering BTC and other currencies as shares in a coin-held trust. Various trusts have proven to be popular with institutional investors, some of whom do not want to buy cryptocurrencies directly, and also with retail investors who like cryptocurrencies in a wider portfolio of stocks.
In the last year, however, shares in its flagship trusts BTC and ETH have been trading below the base price of the cryptocurrencies themselves – creating a so-called negative premium.
Salm downplays the importance of Grayscale’s declining share price for BTC and ETH products. “Institutions are now buying products in Grayscale because they know there will be an ETF,” he says, explaining that the institutions are buying shares in hopes of collecting through arbitration.
In order for this arbitration to take place, the SEC must eventually approve the BTC or ETH ETF. Salm acknowledges that the ETF’s approval process may take until 2022 and adds that Grayscale is ready to convert its existing trust shares into ETF shares as soon as the SEC gives the green light.