The U.S. Securities and Exchange Commission (SEC) has unexpectedly paused the conversion of Grayscale Investments’ Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF), just hours after initially approving the move. The fund, which includes XRP, Solana, and Cardano alongside Bitcoin and Ethereum, faced a regulatory freeze via a July 1, 2025, order citing Rule 431 of the SEC’s Rules of Practice.
Key Details of the SEC’s Decision
- Immediate Effect: The stay prevents GDLC from listing on NYSE Arca until further review.
- Delegated Authority: The SEC’s Division of Trading & Markets had approved the ETF under Exchange Act Rule 19b-4, but the Commission intervened for plenary review.
- Fund Composition: GDLC holds $755 million in assets, with 80% Bitcoin, 11% Ethereum, and 8% allocated to XRP, Solana, and Cardano—tokens the SEC hasn’t classified as commodities.
Why the SEC Paused the Multi-Coin ETF
Potential Reasons for the Freeze
- Pending Regulatory Framework:
The SEC may delay all multi-asset ETFs until finalizing a comprehensive digital-asset ETP framework. Analyst James Seyffart speculated the agency isn’t ready to greenlight launches under the current 19b-4 process. - Internal Divisions:
Another SEC division (e.g., Corporate Finance) might oppose GDLC’s structure or disclosures, despite Trading & Markets’ approval.
👉 Explore crypto ETF trends for deeper insights into regulatory developments.
Market Reactions and Analyst Insights
James Seyffart (Bloomberg Intelligence):
"The SEC’s stay doesn’t mean denial—GDLC will likely convert eventually, but the timeline and rationale remain unclear."
Eric Balchunas (Bloomberg):
"The SEC may be drafting crypto ETP listing standards before allowing spot ETFs with altcoins like XRP and ADA."
What’s Next for GDLC?
- Grayscale’s Options: Submit legal briefs to advocate for approval; external stakeholders may also comment.
- Possible Outcomes: The SEC could uphold, modify, or overturn the staff’s decision.
FAQ Section
Q: Will GDLC’s ETF conversion eventually proceed?
A: Likely, but the SEC’s review timeline is uncertain.
Q: Why target XRP, Solana, and Cardano?
A: These tokens lack clear SEC classification as commodities, unlike Bitcoin and Ethereum.
Q: How does this impact crypto markets?
A: Short-term uncertainty may suppress prices; long-term clarity could bolster investor confidence.
👉 Stay updated on crypto regulations with real-time analysis.
Conclusion
The SEC’s intervention underscores its cautious approach to multi-asset crypto ETFs. While GDLC’s future hinges on regulatory review, the pause highlights lingering tensions over altcoin classification and ETF frameworks. Investors should monitor developments closely, as the outcome could set precedents for future crypto financial products.
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