8-K: Grayscale Crypto 5 ETF Lists on NYSE Arca

Grayscale CoinDesk Crypto 5 ETF (GDLC) has commenced trading on NYSE Arca and launched a redemption program, though in-kind transactions remain unavailable.

Summary

• Grayscale CoinDesk Crypto 5 ETF (GDLC) began trading on NYSE Arca on September 19, 2025.
• The Manager approved the commencement of a redemption program on September 18, 2025.
• New Authorized Participant Agreements were entered into with Jane Street Capital, LLC, Macquarie Capital (USA) Inc., and Virtu Americas LLC, effective September 18, 2025.
• The Fund currently only facilitates creations and redemptions through "Cash Orders," meaning digital assets are acquired/disposed of by a Liquidity Provider for cash.
• In-kind creations and redemptions, where Authorized Participants directly exchange digital assets, are not currently possible due to a lack of definitive regulatory guidance and approval.
• The Fund irrevocably abandons all "Forked Assets" (benefits from hard forks or airdrops), meaning shareholders will not receive value from such events.
• The Bank of New York Mellon (BNY Mellon) has been engaged as the new transfer agent, effective September 19, 2025, replacing Continental Stock Transfer & Trust Company, which will now serve as Co-Transfer Agent.
• As of September 16, 2025, each Basket of 10,000 Shares requires 3.6022 Bitcoin, 21.8543 Ether, 10,704.6148 XRP, 97.4253 SOL, and 6,547.5018 ADA.
• Historically, from July 1, 2022, to June 30, 2025, the Shares traded on OTCQX at a maximum discount of 63% and an average discount of 35% to NAV. As of September 16, 2025, the discount was 7%.

Sentiment

Score: 7

Explanation: The listing on NYSE Arca and the commencement of a redemption program are significant positive developments for the Fund, expected to improve liquidity and reduce historical NAV discounts. However, the ongoing inability to facilitate in-kind creations/redemptions, the abandonment of forked assets, and the prohibition on staking represent notable operational and competitive disadvantages. Tax uncertainties also remain a concern.

Positives

• Listing on NYSE Arca (GDLC) is expected to improve liquidity and potentially reduce historical premiums/discounts.
• Commencement of a redemption program provides an arbitrage mechanism, which may help align the Share price with the Net Asset Value (NAV).
• Engagement of new, prominent Authorized Participants (Jane Street Capital, Macquarie Capital, Virtu Americas) enhances market access and liquidity provision.
• The Manager does not expect price differentials for Fund Components across Digital Asset Trading Platforms to adversely impact the arbitrage mechanism.

Negatives

• The Fund is currently unable to facilitate in-kind creations and redemptions, relying solely on less efficient cash orders, which could lead to operational inefficiencies and substantial premiums or discounts to NAV.
• The Manager may limit the number of Shares created via Cash Orders and requires written approval for redemptions, potentially hindering the arbitrage mechanism.
• Shareholders will not receive the benefits of any forks or airdrops, as the Fund irrevocably abandons these Forked Assets.
• The Fund is not permitted to engage in Staking, which could place it at a comparative disadvantage to direct digital asset investments or other vehicles.
• Historical trading on OTCQX showed significant discounts to NAV, with a maximum of 63% and an average of 35% between July 1, 2022, and June 30, 2025, and a 7% discount as of September 16, 2025.
• The Fund's reliance on Coinbase Global as Prime Broker and Custodian, which also serves competing products, creates a risk of inadequate resourcing or unfavorable commercial terms.
• Certain Authorized Participants also serve competing products, potentially leading to them favoring other products over the Fund.

Risks

• Liquidity Risk: If Authorized Participants cease obligations or Liquidity Engager cannot engage Liquidity Providers, Shares liquidity could decrease.
• Trading Price vs. NAV Discrepancy: Shares may trade at a price at, above, or below the Fund's NAV per Share due to non-current trading hours between NYSE Arca and the 24-hour Digital Asset Trading Platform Market, potentially leading to significant price gaps.
• Redemption Program Suspension: Any suspension or unavailability of the Fund's redemption program may cause Shares to trade at a discount to the NAV per Share.
• Loss on Investment from Premiums/Discounts: Shareholders may suffer a loss if they purchase Shares at a premium and sell when the premium decreases, or purchase directly from the Fund and sell at a discount on NYSE Arca.
• No Active Trading Market Guarantee: There is no guarantee that an active trading market for the Shares will develop or be maintained on NYSE Arca, and trading could be halted.
• Lack of In-Kind Creations/Redemptions: The inability to facilitate in-kind transactions could lead to operational inefficiencies, substantial premiums/discounts, impaired liquidity, and wider bid/ask spreads.
• No Fork/Airdrop Benefits: Shareholders will not receive economic benefits from hard forks or airdrops, as the Fund irrevocably abandons these assets.
• No Staking: The Fund is not permitted to engage in Staking, which could negatively affect the value of the Shares compared to other digital asset investments.
• Coinbase Global Conflicts of Interest: Coinbase Global, as custodian and prime execution agent, serves competing products, raising risks of inadequate support or unfavorable terms for the Fund.
• Authorized Participant Conflicts of Interest: Authorized Participants serving competing products may prioritize other products, adversely affecting the Fund's arbitrage mechanism and operations.
• Competition: Emergence or growth of other digital asset investment methods could negatively impact Fund Component prices.
• Emerging Growth Company Status: Reduced disclosure requirements may make Shares less attractive to investors, potentially leading to a less active trading market and more volatile prices.
• Imperfect Correlation with Index: The Fund may not achieve perfect correlation with the Index due to factors like the Manager's discretion to include/exclude digital assets or the "Weightings Floor."
• Passive Foreign Investment Company (PFIC) Status: The Fund may be a PFIC for U.S. federal income tax purposes, leading to materially adverse tax consequences for U.S. Holders if QEF or MTM elections are not made.
• Uncertain U.S. Federal Income Tax Treatment of Digital Assets: The evolving nature of digital assets and lack of comprehensive guidance create uncertainty, with potential for adverse tax consequences.
• Future Tax Developments: Changes in U.S. federal, state, local, or non-U.S. tax treatment of digital assets could adversely affect the value of the Shares.
• U.S. Federal Income Tax on Fund Activities: The Fund could be subject to U.S. federal income tax if its activities (e.g., trading, staking, lending) are deemed a U.S. trade or business.
• U.S. Federal Withholding Tax: The Fund may be subject to 30% withholding tax on income from digital asset lending, forks, airdrops, or staking.

Future Outlook

The Fund may in the future create and redeem Baskets via In-Kind Orders if NYSE Arca obtains necessary regulatory approval from the SEC to amend its listing rules. However, there is no assurance as to when such clarity will emerge or when approval will be sought or obtained. The Manager may also adjust the creation and redemption order size in the future to improve the effectiveness of Authorized Participants' activities. The Manager has committed to irrevocably abandoning all Forked Assets, and any change to this policy would require further SEC approval.

Management Comments

• The Manager believes that the trading price of the Shares has diverged from the NAV per Share in the past due, in part, to the holding period under Rule 144 for Shares purchased in the private placement and the lack of an ongoing redemption program.
• Although the Manager cannot predict with certainty what effect the commencement of the Funds redemption program, in conjunction with the listing of the Shares on NYSE Arca, will have on the trading price of the Shares, it may have the effect of reducing any premium or discount at which the Shares have been trading on the OTCQX immediately prior to the commencement of the redemption program.
• The Manager believes that it is generally more efficient, and therefore less costly, for spot commodity exchange-traded products to utilize in-kind orders rather than cash orders, because there are fewer steps in the process and therefore there is less operational risk involved.
• The Manager does not expect price differentials for Fund Components across Digital Asset Trading Platforms or the closure of any single Digital Asset Trading Platform to adversely impact the ability of Authorized Participants to implement arbitrage mechanisms, as Fund Components could be sourced through multiple Digital Asset Trading Platforms.
• The Manager has committed to cause the Fund not to take any Affirmative Action to acquire any Forked Assets, thereby irrevocably abandoning any Forked Assets to which the Fund may become entitled in the future.
• The Manager believes that the Fund will not be treated as engaged in a trade or business in the United States and thus will not derive income that is treated as effectively connected income.

Industry Context

The listing of the Grayscale CoinDesk Crypto 5 ETF on NYSE Arca and the commencement of its redemption program align with the broader trend of increasing institutional adoption and regulatory clarity for spot digital asset exchange-traded products in the U.S. While the SEC has recently approved in-kind creations and redemptions for *certain* spot digital asset ETPs, the Grayscale ETF's current reliance on cash orders highlights ongoing regulatory uncertainties and operational challenges specific to the digital asset market, particularly concerning broker-dealer compliance. The inability to engage in staking also places it behind some direct digital asset investments that offer yield. The entry of major Authorized Participants like Jane Street, Macquarie, and Virtu Americas underscores growing market infrastructure for crypto ETFs, despite the unique operational constraints.

Comparison to Industry Standards

• Unlike most spot commodity exchange-traded products (e.g., gold and silver ETFs) that employ in-kind creations and redemptions, this Fund currently only uses cash orders. This is a novel approach for a spot commodity ETP and is generally considered less efficient and more costly due to increased operational steps and risks.
• The Fund's inability to engage in staking places it at a comparative disadvantage to direct investments in proof-of-stake digital assets or other investment vehicles that can generate additional yield through staking rewards.
• The historical trading discounts to NAV on OTCQX (e.g., average 35% from July 2022 to June 2025) are significantly wider than typical discounts/premiums seen in mature, highly liquid ETFs for traditional assets, which usually trade very close to NAV due to efficient arbitrage mechanisms. The listing on NYSE Arca and redemption program aim to narrow this gap, similar to how other recently approved spot Bitcoin ETFs have seen their premiums/discounts converge to NAV.

Corporate Governance

Related Party Transactions

• The Participant Agreement and Distribution and Marketing Agreement, dated October 3, 2022, with Grayscale Securities, LLC, an affiliate and related party of the Fund, were amended, restated, and modified in their entirety to remove the Fund as an entity covered by these agreements, effective September 18, 2025.

Stakeholder Impact

• Shareholders: Potential for improved liquidity and reduced NAV discounts due to NYSE Arca listing and redemption program. However, they will not benefit from forks or airdrops, and the lack of in-kind redemptions and staking capabilities could be a disadvantage. U.S. Holders face complex tax considerations due to potential PFIC status and uncertain digital asset tax treatment.
• Authorized Participants: New agreements with Jane Street Capital, Macquarie Capital, and Virtu Americas establish their role in creation/redemption. They bear certain risks related to price differentials in Actual Execution Cash Orders and are responsible for various taxes. They may face conflicts if also serving competing products.
• Grayscale Investments Sponsors, LLC (Manager): Continues to manage the Fund, including discretion over creation/redemption limits and determining order types. Bears responsibility for engaging Liquidity Providers.
• The Bank of New York Mellon (Transfer Agent): New role as transfer agent, providing key administrative services for the Fund's shares.
• Continental Stock Transfer & Trust Company: Transitioned from transfer agent to Co-Transfer Agent.
• Liquidity Providers: Engaged by the Liquidity Engager to facilitate cash orders, bearing price differential risks in Variable Fee Cash Orders.

Next Steps

• NYSE Arca may seek necessary regulatory approval from the SEC to amend its listing rules to allow In-Kind Orders for the Fund.
• The Manager may engage additional Authorized Participants in the future.
• The Manager may adjust the creation and redemption order size in the future to improve the effectiveness of Authorized Participants' activities.
• The Manager will notify investors of any material change to its policy with respect to Forked Assets by filing a current report on Form 8-K.
• Shareholders are urged to consult their tax advisers about the application of U.S. federal income tax laws to their particular situations.

Key Dates

Recommendation

The listing on NYSE Arca and the commencement of a redemption program are positive steps that should improve liquidity and narrow the historical discount to NAV, making the ETF more attractive. However, the continued inability to conduct in-kind creations/redemptions, the explicit abandonment of forked assets, and the prohibition on staking represent significant operational and competitive drawbacks in the evolving digital asset market. Furthermore, the complex and uncertain U.S. federal income tax implications, particularly the potential PFIC status, add a layer of risk for U.S. investors. While the arbitrage mechanism is now in place, these structural limitations and tax uncertainties warrant a 'hold' recommendation, advising investors to monitor regulatory developments, particularly regarding in-kind transactions and staking, before making further commitments.

Keywords

Grayscale, CoinDesk Crypto 5 ETF, GDLC, NYSE Arca, Digital Assets, Cryptocurrency, ETF, Spot Crypto ETF, Redemption Program, Cash Orders, In-Kind Redemptions, Authorized Participants, Bitcoin, Ether, XRP, SOL, ADA, SEC Filing, 8-K, Financial Reporting, Investment Fund, Risk Factors, Tax Consequences, Arbitrage