SEC halts Grayscale’s bid to covert BTC, ETH, XRP, SOL large-cap fund into a spot ETF despite approval order

Key Takeaways

The Division of Trading and Markets, acting under delegated authority, approved the rule change for listing GDLC, but the Commission intervened and reviewed the approval.
The approval is now stayed pending a final decision by the full Commission.

Grayscale’s effort to convert its Digital Large Cap Fund (GDLC) into a spot ETF made headway this week after the SEC on Tuesday granted approval for the listing and trading of the fund on NYSE Arca.

Yet investors will have to wait longer, as its debut has been temporarily delayed.

In a letter dated July 1, the SEC notified NYSE Group that it would conduct a review of the recent approval granted under delegated authority. Under Commission rules, such a review automatically pauses the effectiveness of the decision, placing the proposed ETF launch on hold until the review is complete.

Bloomberg ETF analysts Eric Balchunas and James Seyffart suggested the delay may be tied to the SEC’s ongoing efforts to establish new listing standards for crypto exchange-traded products.

“The SEC doesn’t want to let anything launch under the 19b-4 process until they officially approve or come up with some framework for digital assets in the ETF wrapper,” Seyffart suggested.

“They want to issue the crypto ETP listing standards before any ’33 Act spot ETFs hit the market with these other coins,” Balchunas speculated.

The GDLC Fund, which tracks a market-cap-weighted basket of top digital assets, is one of Grayscale’s attempts to offer investors diversified investment options through a regulated fund structure.

As of July 1, the fund had approximately $755 million in assets under management, with a portfolio covering Bitcoin, Ethereum, XRP, Solana, and Cardano.