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Grayscale receives approval for the first public cryptocurrency based security

  • Grayscale Investments announced yesterday that shares of the Grayscale Digital Large Cap Fund (DLC) has received FINRA’s approval for public listing under the symbol GDLCF.
  • The company will be launching the first publicly tradable security in the U.S. based on cryptocurrencies. 

The Securities and Exchange Commission (SEC) is not expected to approve a Bitcoin ETF in the United States in 2019, as CNF reported. However, Grayscale Investments has received the approval for a publicly listed security from the Financial Industry Regulatory Authority (FINRA), which derives its value from a portfolio of cryptocurrencies. FINRA is a U.S. regulatory authority responsible for the supervision of the securities industry.

Grayscale will thus launch the first publicly tradable cryptocurrency security in the US. As the company announced in a press release yesterday, FINRA has given the green light this week for the shares of Grayscale’s Digital Large Cap Fund (DLC), which will be traded under the symbol GDLCF on over-the-counter (OTC) markets.

The New York-based company describes the security this way:

DLC is an open-ended fund managed by Grayscale. DLC enables investors to gain exposure to the price movement of a diversified basket of large-cap digital currencies through an investment vehicle, avoiding the challenges of buying, storing, and safekeeping digital currencies directly. 

The fund is therefore similar to an ETF where investors can invest in cryptocurrencies through a diversified and market capitalisation-weighted portfolio. As of 30 September 2019, the security is composed of 80.3% Bitcoin (BTC), 9.9% Ethereum (ETH), 5.8% XRP, 2.2% Bitcoin Cash (BCH) and 1.8% Litecoin (LTC). Moreover, as of 30 September 2019, each share represented: 0.00049043 Bitcoin (BTC), 0.0028352525 Ethereum (ETH), 1.13609958 XRP, 0.00049348 Bitcoin Cash (BCH) and 0.00160253 Litecoin (LTC). The composition is evaluated and changed on a quarterly basis.

Grayscale has been offering DLC accredited investors a private placement since February 2018. As of September 30, 2019, there were 3,194,900 shares outstanding according to the press release.

A first step

The FINRA approval is a further step and means further recognition for the maturity of the crypto market. However, the approval should not be overrated and should not be considered as a positive sign for the approval of a Bitcoin ETF. The Grayscale DLC is not registered with the Securities and Exchange Commission and is therefore not subject to the more stringent SEC requirements required by U.S. securities laws.

In the press release, Grayscale stated that the shares are DTC-capable, which Grayscale claims it expects to see soon:

There will be no trading volume in the Shares’ public quotation until the Shares are DTC eligible, which GDLC is expected to receive soon. Investors will be able to buy and sell freely-tradable DLC shares through their investment accounts in the same manner as they would other unregistered securities. 

The Grayscale DLC will be the Company’s fourth listed investment product, after the Grayscale Bitcoin Trust (OTCQX: GBTC), Grayscale Ethereum Trust (OTCQX: ETHE) and Grayscale Ethereum Classic Trust (OTCQX: ETCG), which are also publicly listed and will be available to all investors with access to US securities.

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