Grayscale ETF Encounters Indeterminate Postponement as SEC Reevaluates Prior Endorsement
It took just one day for the US Securities and Exchange Commission (SEC) to retract its endorsement for Grayscale Digital Large Cap Fund (GDLC) to transition into an exchange-traded fund (ETF), unintentionally delaying its debut.
On July 1, 2025, the SEC released a letter indicating its plans to reassess the recent consent provided to GDLC for its ETF conversion.
The SEC’s endorsement of the Grayscale ETF was celebrated as a significant milestone for multi-asset crypto ETFs in the US. For those unfamiliar, Grayscale offers a regulatory framework for a product that tracks Bitcoin, ETH, and other prominent tokens by transforming its multi-asset crypto fund.
The initial authorization from the regulatory authorities implied confidence in the product’s trading market readiness. However, the decision was made to invoke Rule 431 of the SEC’s Rules of Practice for a review of its previous ruling.
Breaking announcement from yesterday and insights
– Despite initial approval from the SEC, it recently paused plans to convert Grayscale’s Digital Large Cap Fund into an ETF
This temporary delay doesn’t equate to denial, but it signifies a need for further review to evaluate: Market… https://t.co/apyNUx2D62
—
Salazar.eth
The GDLC fund comprises $755 million in Bitcoin, ETH, Solana, XRP, and Cardano. Some analysts suggest that the SEC’s agency staff approved this decision rather than the commissioners, which could explain the retraction.
In its correspondence to the New York Stock Trading protocol (NYSE), the SEC stated, “This letter serves to inform you that, pursuant to Rule 431 of the Commission’s Rules of Practice, 17 CFR 201.431, the Commission will reassess the delegated action.”
Furthermore, it confirmed, “In accordance with Rule 431(e), the July 1, 2025, order is stayed until the Commission decides otherwise.”
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Rare SEC Review of Grayscale ETF Application Due to Non-BTC crypto Exposure
The GDLC fund, established in 2018, encompasses a diverse selection of cryptocurrencies, with over 91% of its investments concentrated in ETH and BTC. The remaining portion comprises altcoins like XRP, Solana, and Cardano.
Additionally, the GDLC includes prominent cryptocurrencies based on crypto market capitalization and is adjusted quarterly to reflect market changes. If approved, the GDLC is set to become a public ETF, enabling investors to long-term holding multiple crypto assets in one portfolio.
Historically, such reversals are rare and often reflect ongoing internal discussions surrounding investor protection, regulatory uniformity, and market stability. The presence of altcoins, which present varying degrees of risk, may have prompted the SEC commissioners to retract the staff-level approval.
The inclusion of assets like XRP and Solana, which remain in a state of regulatory uncertainty, could have raised apprehensions about the legal status of the underlying tokens and the transparency of disclosures, as multi-asset products like Grayscale’s introduce added structural and legal complexities compared to conventional single-asset ETFs.
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Bloomberg Analyst Speculates SEC is Reevaluating Grayscale ETF for Clearer Guidelines
Some analysts, including Bloomberg’s Eric Balchunas, speculate that the SEC is re-evaluating the Grayscale ETF in order to establish clearer rules before approving additional intricate crypto funds. Balchunas also theorizes that the regulatory agency is waiting to implement consistent regulations for crypto investment products before granting approval for GDLC’s ETF.
The plot thickens. High-ranking SEC officials informing $GDLC it cannot proceed until further notice. The reasoning is unclear, with no additional details provided beyond this letter. My assumption is that they aim to develop crypto ETP listing standards before any ’33 act spot ETFs incorporate these other coins. So, likely… https://t.co/Za7rYk1o0E
— Eric Balchunas (@EricBalchunas) July 2, 2025
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Key Takeaways
- The GDLC fund has $755 million in Bitcoin, Ethereum, Solana, XRP, and Cardano
- BTC and Ethereum account for over 91% of the GDLC fund’s assets
- Multi-asset products, such as Grayscale’s, introduce added layers of structural and legal complexities compared to single-asset ETFs
The post Grayscale ETF Faces Indefinite Delay as SEC Reassesses Earlier Approval appeared first on 99Bitcoins.
