10-K: Grayscale Stellar Lumens Trust Reports 307% Net Asset Growth in 2025

Grayscale Stellar Lumens Trust (XLM) saw its net assets surge by 307% to $43.08 million in the fiscal year ended September 30, 2025, driven by significant XLM price appreciation.

Summary

• Net assets of Grayscale Stellar Lumens Trust (XLM) increased by 307% to $43.08 million for the fiscal year ended September 30, 2025, up from $10.57 million in 2024.
• This growth was primarily due to XLM price appreciation, with the price per XLM rising from $0.10 on September 30, 2024, to $0.37 on September 30, 2025.
• The Trust reported a net realized and unrealized gain on investment of $31.44 million in 2025, a significant improvement from losses in 2024 ($1.35 million) and 2023 ($0.23 million).
• The fiscal year-end for financial accounting purposes was amended on November 4, 2025, moving from September 30 to December 31, effective for the fiscal year beginning January 1, 2025.
• The Trust's investment objective is for the Shares to reflect the value of XLM held, less expenses, but historically Shares have traded at substantial premiums (max 461%, average 113%) and discounts (max 35%, average 10%) to NAV per Share. As of September 30, 2025, Shares traded at a 6% premium.
• The Trust does not currently operate a redemption program, which limits arbitrage opportunities and contributes to price deviations from NAV.
• Grayscale Investments Sponsors, LLC (GSIS) is the sole Sponsor, following a reorganization and withdrawal of Grayscale Operating, LLC (GSO) earlier in 2025.

Sentiment

Score: 7

Explanation: The Trust experienced exceptional financial growth in 2025, with net assets increasing by 307% due to significant XLM price appreciation and positive investment gains. This strong performance is a clear positive. However, the Trust operates in a highly volatile and uncertain digital asset market, faces substantial regulatory risks, and has structural limitations such as the lack of a redemption program and historical trading at significant premiums/discounts to NAV. These inherent risks and operational constraints temper the overall positive sentiment, making it a strong financial year but with significant underlying challenges.

Positives

• Significant net asset growth of 307% in fiscal year 2025, reaching $43.08 million.
• Strong XLM price appreciation from $0.10 to $0.37 per XLM during fiscal year 2025.
• Net realized and unrealized gain on investment of $31.44 million in 2025, reversing losses from prior years.
• The Trust offers a cost-effective and convenient way for investors to gain exposure to XLM without direct asset management.
• Robust security measures are in place for XLM custody, including cold storage, multiple encrypted private key shards, and geographic distribution of vaults.
• The Custodian (Coinbase Custody Trust Company, LLC) is a regulated fiduciary and qualified custodian.
• SEC dismissed charges against major digital asset trading platforms (Binance, Coinbase, Kraken) between February and May 2025, potentially reducing regulatory overhang.
• New legislative efforts like the GENIUS Act (stablecoins) and CLARITY Act (digital asset markets) indicate a move towards clearer regulatory frameworks in the U.S.

Negatives

• The Trust has consistently failed to meet its investment objective, with Shares trading at substantial premiums (up to 461%) and discounts (up to 35%) to NAV per Share.
• The absence of an ongoing redemption program prevents arbitrage, exacerbating deviations between Share price and NAV.
• XLM prices and the broader digital asset market are subject to extreme volatility, as evidenced by significant fluctuations and market disruptions (e.g., FTX collapse).
• The digital asset industry faces ongoing regulatory uncertainty, with potential for new laws or interpretations that could adversely affect XLM's value or the Trust's operations.
• Concentrated ownership of XLM (top 100 wallets hold ~61% excluding SDF, ~75% including SDF) poses a risk of price manipulation from large sales.
• The Stellar Development Foundation's control over XLM distribution could lead to price declines if distribution plans deviate or are perceived negatively.
• Potential conflicts of interest exist due to the Sponsor and its affiliates (e.g., Grayscale Securities as sole Authorized Participant) having intertwined business interests.
• Shareholders have limited voting rights and restricted ability to bring derivative actions, requiring a 10% ownership threshold by non-affiliated shareholders.
• Extraordinary expenses, such as taxes or legal fees, are borne by the Trust and can reduce the amount of XLM per Share, leading to tax liability for shareholders without a corresponding distribution.

Risks

• Extreme volatility of XLM trading prices, potentially leading to substantial loss of value for Shares.
• Uncertain medium-to-long term value of Shares due to the nascent stage of blockchain technologies and digital assets.
• Dependence of Share value on the acceptance of digital assets, which is a new and rapidly evolving industry.
• Risk of temporary or permanent forks or clones of the Stellar Network adversely affecting XLM value and Trust operations.
• Ongoing extreme volatility and disruption in digital asset markets, including loss of confidence in ecosystem participants and market-wide liquidity declines, as seen with FTX and other failures.
• The largely unregulated nature and lack of transparency of Digital Asset Trading Platforms, which may lead to fraud, market manipulation (e.g., wash-trading, front-running), business failures, security breaches, or operational problems.
• Limited history of the Index used for XLM valuation, and potential for material price differences between the Index Price and actual market prices.
• Competition from other digital assets (e.g., Bitcoin, Ether, Solana) and private blockchain platforms (e.g., R3 Corda, Hyperledger) could negatively impact XLM demand and price.
• Reliance on third-party service providers (Custodian, Authorized Participants) introduces risks of business disruptions, security failures, and challenges in replacement, potentially leading to loss of Trust assets.
• A determination that XLM is a security by the SEC or a federal court could have a material adverse impact on XLM's trading value, liquidity, and potentially lead to the Trust's termination.
• Regulatory changes or actions by U.S. federal or state agencies, or foreign jurisdictions, may restrict XLM use, validating activity, or Digital Asset Markets, adversely affecting Share value.
• The Trust or Sponsor could be subject to regulation as a money service business or money transmitter, incurring extraordinary expenses and decreasing Share liquidity.
• Uncertainty regarding the U.S. federal income tax treatment of digital assets, including forks and airdrops, could result in adverse tax consequences for shareholders, including potential Unrelated Business Taxable Income (UBTI) for tax-exempt entities.
• Security threats to the Digital Asset Account, including hacking and malware, could result in theft, loss, or destruction of Trust assets.
• XLM transactions are irrevocable, meaning stolen or incorrectly transferred XLM may be irretrievable.
• Lack of full insurance coverage for Trust assets and limited legal recourse against service providers expose the Trust and shareholders to potential losses.
• The Trust may be required to terminate and liquidate its assets at a disadvantageous time, potentially resulting in losses for shareholders.
• The Trust Agreement's provisions limit shareholder voting rights and restrict derivative actions, potentially hindering shareholder recourse.
• The Sponsor's sole discretion in determining NAV and Index Price, with potential for errors or changes in methodology, could adversely affect Share value.
• Extraordinary, non-recurring expenses (e.g., taxes, legal fees) are borne by the Trust, requiring the sale of XLM and reducing the amount of XLM per Share.
• Pandemics, epidemics, and other natural/man-made disasters could negatively impact demand for digital assets and disrupt Trust operations.
• Shareholders may not receive the economic benefits of any forks or airdrops due to operational, tax, or regulatory limitations.
• Competition from central bank digital currencies (CBDCs) could adversely affect XLM's price.
• Volatility and regulatory concerns surrounding stablecoins (e.g., Tether, USDC) could impact the broader digital asset market and XLM prices.
• The Stellar Development Foundation's significant control over XLM distribution could lead to price declines if its plans are perceived negatively or deviate.

Future Outlook

The Trust intends to file a transition report on Form 10-K/T for the period beginning October 1, 2025, and ending December 31, 2025, to align with its new fiscal year-end. Thereafter, annual reports will cover the twelve-month period ending December 31 of each year, starting with December 31, 2026. The Sponsor plans to engage additional Authorized Participants unaffiliated with the Trust in the future. The Trust may, subject to SEC regulatory approval and Sponsor discretion, operate a redemption program in the future, though no assurance is given on timing or approval. The SEC has launched a Crypto Task Force and Project Crypto to develop a comprehensive and clear regulatory framework for digital assets, including drafting rules for crypto asset distributions, custody, and trading.

Management Comments

• Peter Mintzberg, Principal Executive Officer of the Sponsor, certified that the annual report fairly presents the financial condition, results of operations, and cash flows of the Trust.
• Edward McGee, Principal Financial and Accounting Officer of the Sponsor, certified that the annual report fairly presents the financial condition, results of operations, and cash flows of the Trust.
• The Sponsor believes the Index Provider's selection process for Constituent Trading Platforms and the methodology of the Index Price algorithm provide a more accurate picture of XLM price movements than a simple average of Digital Asset Trading Platform spot prices.
• The Sponsor believes that the security procedures in place for the Trust are reasonably designed to safeguard the Trust's XLM.
• The Sponsor believes there are currently no risks from any potential cybersecurity threat or cybersecurity incident that are reasonably likely to have a material effect on the Trust's results of operations or financial condition.
• The Sponsor believes that the Trust's Shares would qualify for listing and trading under NYSE Arca's generic listing standards for commodity-based trust shares holding digital assets, but has not obtained relief from the SEC under Regulation M.
• The Sponsor intends to take the position that the Trust is properly treated as a grantor trust for U.S. federal income tax purposes.
• The Sponsor believes it is applying the proper legal standards in determining that XLM is not a security and does not intend to dissolve the Trust on the basis that XLM could at some future point be finally determined to be a security, as long as there are good faith grounds to conclude it is not a security.

Industry Context

The digital asset industry remains highly volatile and rapidly evolving, marked by significant market disruptions and increased regulatory scrutiny following events like the FTX collapse. While the SEC has dismissed charges against major trading platforms and is actively working on a clearer regulatory framework through initiatives like the Crypto Task Force and Project Crypto, substantial uncertainty persists. The emergence of central bank digital currencies (CBDCs) and private blockchain initiatives from financial institutions poses competitive threats to existing digital assets like XLM. Digital Asset Trading Platforms continue to operate with varying degrees of regulation, leading to risks of fraud and manipulation. The stability and regulatory treatment of stablecoins, which are integral to digital asset markets, also significantly impact broader market dynamics.

Comparison to Industry Standards

• XLM is the 16th largest digital asset by market capitalization as of September 30, 2025, with an aggregate market value of $11.6 billion, significantly smaller than Bitcoin's $2,272.9 billion.
• The Stellar Network processes approximately 34.3 transactions per second, which is faster than Bitcoin's block production rate of around every 9 minutes.
• Stellar Network's average daily transaction fees were approximately $0.001479 as of September 30, 2025, considerably lower than Bitcoin's average daily transaction fees of $0.65.
• The Stellar Network utilizes the Federated Byzantine Agreement consensus mechanism, which is similar to proof-of-stake but does not include staking rewards, differentiating it from some other digital asset networks.
• Unlike the Ripple network, the Stellar Network facilitates the creation of tokenized assets and offers a decentralized trading platform.
• The Trust's security procedures, including cold storage and geographically distributed private key shards, are presented as enhanced compared to other digital asset financial vehicles that may use less effective security protocols.
• The Trust directly owns actual XLM, contrasting with other digital asset financial vehicles that provide exposure through financial or derivative instruments.
• The Custodian, Coinbase Custody Trust Company, LLC, is a fiduciary under New York Banking Law and a qualified custodian under the Investment Advisers Act, providing a level of regulatory compliance for asset custody.

Management Changes

Corporate Governance

Legal Proceedings

• Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd. filed a complaint against Digital Currency Group, Inc. (DCG) and certain affiliates, including Grayscale Operating, LLC (former Co-Sponsor), on May 19, 2025, alleging preferential transfers. Grayscale Operating, LLC intends to vigorously defend against this lawsuit.
• The SEC brought charges against Binance, Coinbase, and Kraken for allegedly operating unregistered securities exchanges, brokerages, and clearing agencies. These complaints were dismissed via court-approved joint stipulations between February 2025 and May 2025.
• The SEC launched a Crypto Task Force in January 2025, dedicated to developing a comprehensive and clear regulatory framework for digital assets.
• Chairman Atkins announced 'Project Crypto' on July 31, 2025, an initiative to modernize securities rules for digital assets and reshore innovation in the United States.
• The GENIUS Act, regulating the issuance, custody, and other stablecoin-related matters, was signed into federal law in July 2025.
• The Digital Asset Market Clarity Act of 2025 (CLARITY Act), which would regulate digital asset markets and trading platforms, was passed by the House of Representatives in July 2025.
• In April 2024, the DOJ arrested and charged developers of the Samourai Wallet mixing service with conspiracy to commit money laundering and operate an unlicensed money transmitting business.
• A co-founder of Tornado Cash was sentenced to over five years imprisonment in the Netherlands in May 2024, and another co-founder was convicted of conspiracy to operate an unlicensed money transmitting business in August 2025.

Related Party Transactions

• Digital Currency Group, Inc. (DCG), the indirect parent company of the Sponsor, holds 2.13% of the Trust's Shares as of November 20, 2025.
• DCG authorized the purchase of up to $200 million worth of Trust shares (and shares of other affiliated investment products) on March 2, 2022, but has not purchased any Trust shares under this authorization through November 20, 2025.
• DCG holds a minority interest of less than 1.0% in Kraken, one of the Digital Asset Trading Platforms included in the Index.
• Grayscale Securities, LLC, an affiliate of the Sponsor and DCG, is the only acting Authorized Participant, distributor, and marketer for the Shares.
• The Sponsor and its affiliates have no fiduciary duties to the Trust and its shareholders other than as provided in the Trust Agreement, which may allow them to favor their own interests.
• The Trust indemnifies the Sponsor and its affiliates for certain liabilities or expenses.

Stakeholder Impact

• Shareholders: Experienced significant appreciation in net assets in 2025, but face risks from market volatility, regulatory uncertainty, and the Trust's structural limitations (e.g., premium/discount to NAV, limited redemption options, restricted voting rights). Potential for tax liability without associated distributions.
• Sponsor (Grayscale Investments Sponsors, LLC): Benefits from the Sponsors Fee (2.5% annual rate of NAV Fee Basis Amount) and manages the Trust's operations. Faces potential conflicts of interest due to affiliations with other service providers and DCG's broader digital asset investments.
• Custodian (Coinbase Custody Trust Company, LLC): Provides secure custody services for the Trust's XLM. Its liability is limited, and there is uncertainty regarding the legal rights of customers in the event of its insolvency.
• Authorized Participants (Grayscale Securities, LLC): Acts as the sole Authorized Participant, facilitating share creations. Benefits from its role but is also an affiliate of the Sponsor, raising potential conflict of interest concerns.
• Digital Asset Market Participants: The Trust's activities and the broader digital asset market are influenced by regulatory developments, market volatility, and competition from other digital assets and financial products.
• Regulators (SEC, CFTC, FinCEN, etc.): Actively examining and developing frameworks for digital assets, which could significantly impact the Trust's operations and the value of XLM.

Next Steps

• File a transition report on Form 10-K/T for the period beginning October 1, 2025, and ending December 31, 2025.
• Thereafter, file annual reports for the twelve-month period ending December 31 of each year, beginning with December 31, 2026.
• Sponsor intends to engage additional Authorized Participants unaffiliated with the Trust in the future.
• The Trust may, subject to regulatory approval from the SEC and approval by the Sponsor, operate a redemption program in the future.

Key Dates

Recommendation

While the Trust demonstrated strong financial performance in the fiscal year 2025, driven by the appreciation of Stellar Lumens, the underlying digital asset market remains highly volatile and subject to significant regulatory uncertainty. The Trust's structural limitations, particularly the absence of an ongoing redemption program, mean its shares often trade at a substantial premium or discount to its Net Asset Value, limiting arbitrage opportunities for investors. Given these factors, a 'Hold' recommendation is appropriate for a seasoned investor, acknowledging the potential for continued asset appreciation but also the considerable risks and lack of direct control over market price deviations.

Keywords

Stellar Lumens, XLM, Grayscale, Digital Assets, Cryptocurrency, SEC Filing, 10-K, Investment Trust, Financial Report, Blockchain, Asset Management, OTCQX, GXLM, Digital Currency Group, Grayscale Investments, Coinbase Custody, Regulation, Risk Factors, Net Assets, Market Volatility, Arbitrage, Custody, Smart Contracts, Stablecoins, Central Bank Digital Currencies