SEC quickly withdrew the approval order, halting Grayscale's diversification fund conversion.
The U.S. Securities and Exchange Commission (SEC) unexpectedly paused the approval order for Grayscale's Digital Large Cap Fund (GDLC) to convert to an ETF today (7/3), just one day after that approval took effect (7/2). This fund, with $775 million in assets under management, includes the five major cryptocurrencies Bitcoin, Ethereum, XRP, Solana, and Cardano, and was originally expected to become the first spot ETF covering $ADA and $XRP.
SEC Deputy Secretary J. Matthew DeLesDernier stated in a letter to the New York Stock Exchange: 'The committee will review this delegated action. According to Rule 431(e), the order of July 1, 2025, will be suspended until the committee orders otherwise.' This means that, despite the SEC's trading and markets division having approved the conversion application, senior officials of the committee decided to reconsider this decision.
Source: SEC The SEC paused the approval order for Grayscale's Digital Large Cap Fund (GDLC) to convert to an ETF today (7/3).
The fund is currently traded as a closed-end fund in the over-the-counter market, accessible only to accredited investors, with Bitcoin accounting for nearly 80%, Ethereum around 11%, while Solana, Cardano, and XRP each hold single-digit percentages. Once the suspension is lifted, the fund will convert to a physical purchase and redemption format ETF, replacing the current closed-end structure.
Analysts speculate that the regulatory framework is not yet ready.
Bloomberg ETF analyst James Seyffart presented two main theories regarding this sudden pause.
First, he believes that the SEC may not want any product to be listed through the 19b-4 process before formally establishing a digital asset ETF framework. Reports suggest that the SEC is currently working with exchanges to create simplified listing standards for cryptocurrency ETFs, which would allow cryptocurrency ETFs to list within 75 days, significantly reducing the current 240-day approval window.
Seyffart's second theory suggests that the SEC may have rushed to approve Grayscale's application because today is the final deadline but is not actually ready to allow the product to be listed. He speculates that regulators do not want to reject the application but are also not prepared for a formal release. Another possibility is that there are differences within different departments of the SEC regarding the fund structure; while the trading and markets division approved the 19b-4 application, other departments may not be ready to allow Grayscale to proceed with the conversion.
Bloomberg senior ETF analyst Eric Balchunas also agrees with this interpretation, speculating that the SEC may want to allow the first spot ETFs tracking Solana, Cardano, and Ripple to enter the market before permitting Grayscale's multi-asset fund to trade.
Multiple asset management companies have applications pending review, and a unified standard is imminent.
The SEC is currently reviewing multiple cryptocurrency ETF applications, including those submitted by Bitwise, Hashdex, and Franklin Templeton for other cryptocurrency basket funds. Notably, the deadline for a decision on Bitwise's application is July 31, which could be a key date to watch for rumors about the new framework.
Recent reports indicate that the SEC and U.S. exchanges are drafting universal listing standards for token ETFs. Under this proposal, issuers would only need to submit an S-1 form and wait for the customary 75-day period; if the registration becomes effective, they can launch the product. This framework would allow issuers to bypass the current Rule 19b-4 amendment process required for each product.
Seyffart referred to this prospect as 'very good news,' as a single standard would shorten timelines and provide clear thresholds for market capitalization, trading volume, and liquidity. Based on one of his theories, regulators may be waiting to grant full approval to GDLC in order to approve other ETFs under the same standard.
Although the SEC has approved spot ETFs for Bitcoin and Ethereum, it has yet to approve other altcoin spot ETFs, including those tracking Solana, Cardano, and Ripple products. Analysts estimate that the regulators will almost certainly approve such cryptocurrency products before the end of the year, but when Grayscale's diversification fund will be able to officially convert remains uncertain.
'Approved just one day and then it’s halted! Why is the SEC urgently blocking Grayscale's multi-coin ETF?' This article was originally published in 'Crypto City'.
