Grayscale ETF Hits a Snag As the SEC Walks Back After Approval

It only took one day for the US Securities and Exchange Commission (SEC) to walk back on an approval given to Grayscale Digital Large Cap Fund (GDLC) to convert to an exchange-traded fund (ETF), inadvertently halting its launch.

On 1 July 2025, the SEC shared a letter stating its intention to again review the recent approval granted to GDLC to convert its fund into an ETF.

The SEC’s approval of the Grayscale ETF had been welcomed as a landmark development for multi-asset crypto ETFs in the US. For the uninitiated, Grayscale brings a regulatory structure to a product that tracks Bitcoin, Ethereum, and other leading tokens by converting its multi-asset crypto fund.

The regulatory body’s initial approval indicated that its authorities were confident in the product’s readiness for the market. Nonetheless, it has decided to invoke Rule 431 of the SEC’s Rules of Practice to review its earlier decision.

Breaking news from yesterday and thoughts

– Despite initial clearance from the SEC, it recently hit pause on plans to convert Grayscale’s Digital Large Cap Fund into an ETF

The temporary pause doesn’t necessarily mean denial, it’ll trigger further review, to assess: Market… https://t.co/apyNUx2D62

— 🐍Salazar.eth 🦇🔊 (@0xSalazar) July 3, 2025

The GDLC fund holds $755 million in Bitcoin, Ethereum, Solana, XRP and Cardano. According to some analysts, the SEC’s agency staff signed off on the approval rather than the commissioners, hence the call back.

In its letter addressed to the New York Stock Exchange (NYSE), the SEC said, “This letter is to notify you that, pursuant to Rule 431 of the Commission’s Rules of Practice, 17 CFR 201.431, the Commission will review the delegated action.”

Additionally, it confirmed, “In accordance with Rule 431(e), the July 1, 2025, order is stayed until the Commission orders otherwise.”

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Altcoin Exposure Draws Rare SEC Review of the Grayscale ETF Application

The GDLC fund, launched in 2018, includes a variety of cryptocurrencies, with more than 91% of its holdings invested in Ethereum and Bitcoin. The rest is made up of altcoins such as XRP, Solana and Cardano.

Also, the GDLC includes established cryptocurrencies based on their market size and adjusts every quarter to match changes. If approved, the GDLC will become a public ETF that lets investors hold several crypto assets in one place.

Historically, such reversals are uncommon. They often signal ongoing internal debates on investor protection, managing regulatory consistency and market stability. Altcoins, posing varying degrees of risk, could have been the trigger for the SEC commissioners to renege on the staff-level approval.

The inclusion of assets like XRP and Solana, whose status is still up for debate, may have raised concerns regarding the legal treatment of the underlying tokens and the clarity of disclosure as multi-asset products, such as Grayscale’s, add additional levels of structural and legal complexity, in contrast to single-asset ETFs.

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Bloomberg Analyst Thinks SEC is Reassessing Grayscale ETF to Develop Clearer Rules

Some analysts, such as Bloomberg’s Eric Balchunas, believe that the SEC is reassessing the Grayscale ETF to develop clearer rules before allowing more complex crypto funds. Baluchnas also speculates that the regulatory body is waiting to set consistent standards for crypto investment products before giving the green signal to GDLC’s ETF.

The plot thickens. Upper level of SEC telling $GDLC it can’t launch until otherwise notified. Not sure why, no other info than this letter. My guess tho: They want to issue the crypto ETP listing standards before any ’33 act spot ETFs hit market with these other coins. So likely… https://t.co/Za7rYk1o0E

— Eric Balchunas (@EricBalchunas) July 2, 2025

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Key Takeaways

The GDLC fund holds $755m in Bitcoin, Ethereum, Solana, XRP and Cardano

Bitcoin and Ethereum make up more than 91% of the GDLC fund’s portfolio

Multi-asset products, such as Grayscale’s, add additional levels of structural and legal complexity in contrast to single-asset ETFs