SEC Slams Brakes on Grayscale's ETF Dream: Approval on Hold!

Grayscale's Big Move Stalled by SEC's Last-Minute Review

Hold onto your hats, crypto fans! The U.S. Securities and Exchange Commission (SEC) just threw a massive wrench into Grayscale's plans. They've slammed the brakes on the approval that would've let Grayscale's Digital Large Cap Fund list as a spot exchange-traded fund (ETF) on NYSE Arca. Yep, it's all on hold pending further review. Talk about a plot twist!

On July 2, the SEC dropped a bombshell in a letter, announcing they're taking a second look at the Division of Trading and Markets' July 1 decision. That decision had given Grayscale the green light to convert its fund into an ETF, but now? It's stayed until the commission decides whether to give it a thumbs up or a big fat nope.

Grayscale's Digital Large Cap Fund, which has been trading over-the-counter under the ticker GDLC since 2019, was all set to become a fully regulated ETF. The fund tracks the CoinDesk 5 Index and, at the time of approval, was packed with 80% Bitcoin (BTC), 11.4% Ethereum (ETH), 4.8% XRP (XRP), 2.8% Solana (SOL), and 0.8% Cardano (ADA). It was ready to roll!

Grayscale's been on a mission to get its crypto trusts under regulated structures, and this ETF conversion was a big step. Remember, they took the SEC to court in 2023 and won, forcing a review of their earlier denied spot Bitcoin ETF application. They were on a roll, but now? Not so much.

The paused approval would've let the fund trade on NYSE Arca with daily creation and redemption of shares, all settled in cash. That means more flexibility and liquidity than its old setup. But with the stay in place, all those plans are up in the air.

So, what's next? The SEC isn't spilling any beans on when they'll finish their review or drop a final ruling. It's all a big waiting game now.

This delay is throwing a major curveball for Grayscale and other issuers like Bitwise, Hashdex, and Franklin Templeton, who are all itching to bring their diversified crypto ETFs to the market. They've got similar filings still hanging in limbo.

Until the SEC makes up its mind, Grayscale's Digital Large Cap Fund is stuck in its current form. No ETF trading for now. Stay tuned, folks, because this rollercoaster ride is far from over!