The U.S. Securities and Exchange Commission (SEC) has temporarily halted the conversion of Grayscale’s $755 million Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF), just one day after initially approving the move. The decision follows a commissioner-led review of the staff-approved conversion, freezing the process until further notice.
Key developments:
• The SEC approved GDLC’s ETF conversion on July 1 via delegated authority (staff-level approval), but commissioners intervened hours later, citing Rule 431 for mandatory review.
• GDLC holds Bitcoin (BTC), Ethereum (ETH), XRP, Solana (SOL), and Cardano (ADA), representing a diversified crypto portfolio previously available only to accredited investors.
• This marks the first multi-asset crypto ETF review since Hashdex’s Nasdaq Crypto Index ETF launched in February, signaling regulatory caution toward diversified crypto products.
Regulatory context:
The review reflects ongoing SEC scrutiny of crypto investment vehicles. While the initial approval suggested progress toward mainstream crypto access, the abrupt pause underscores persistent regulatory hesitancy. Commissioners didn’t specify concerns, but the move aligns with the SEC’s focus on anti-fraud measures and market stability.
Market implications:
Grayscale’s fund would have been the first ETF to bundle major cryptocurrencies beyond Bitcoin and Ethereum. Industry analysts view this as a test case for future multi-crypto products, with outcomes potentially shaping how regulators approach diversified digital asset offerings.
