The US Securities and Exchange Commission (SEC) has abruptly blocked the conversion of the Grayscale Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF), despite having issued a positive opinion only a day earlier. The news emerged from a letter sent by the SEC to the NYSE Arca exchange on 2 July.
UPDATE: While @Grayscale was given an approval order for their conversion of $GDLC into an ETF yesterday. There was a letter attached to that approval that is putting a stay on their ability to actually convert at this time. pic.twitter.com/AiEp5tLOou
- James Seyffart (@JSeyff) July 2, 2025
The GDLC fund, launched by Grayscale in 2018 and traded over-the-counter, includes a wide range of cryptocurrencies: about 80 per cent are Bitcoin, about 11 per cent Ethereum and the rest Solana, XRP and Cardano.
Initially, the SEC staff had approved the fund's conversion to an ETF through the delegated authority mechanism. However, on 2 July, a letter was issued in which the Commission announced that it was initiating a formal review of this decision, applying Rule 431(e) and imposing a 'stay', i.e., blocking the decision until further notice from the Commission.
Reasons for suspension
Analysts point to two possible main reasons: the SEC wants to develop uniform standards for listing digital assets in ETFs (defining minimum requirements for capitalisation, liquidity, supervision) before funds containing altcoins are launched.
In addition, an internal debate may have started within the Commission: the initial decision was taken by the Trading and Markets department, but other departments would be willing to wait for a common policy to be developed.
In particular, in a public comment, Bloomberg analyst James Seyffarth said: 'The SEC does not want anything to be launched through the 19b-4 process until a regulatory framework for digital assets in ETFs is created'.
His colleague Eric Balchunas speculated that the hold-up is due to the wait for the first ETFs on assets such as Solana, Cardano and XRP.
The Reactions Of Grayscale And The Market
Grayscale called the suspension 'unexpected', but stressed that it reflected the dynamic and ever-changing regulatory environment surrounding these products. The company has assured that it will continue to work to ensure compliance and has already entered into dialogue with the NYSE and regulator.
For investors and the market, the suspension represents further confirmation of the SEC's cautious, if progressive, approach to integrating cryptocurrencies into mainstream financial products. Although ETFs on Bitcoin and Ethereum have already been approved and are actively traded, the conversion of funds that include a broader range of altcoins, such as XRP, Solana, and Cardano, has not yet occurred.
What Will Happen Now
The SEC has not yet established a timeline for the resolution of the suspension. The letter states that "the suspension is in effect until further notice," meaning an indefinite postponement. However, experts say the development of a single regulatory framework could be completed by the end of the year, paving the way for the launch of both GDLC and other multi-asset ETFs proposed by Bitwise, Franklin Templeton and Hashdex.
For the time being, the fund remains in its closed-ended format, with the usual creation and termination mechanisms, without the ability to trade as an ETF on the NYSE Arca.
The SEC's suspension does not represent a rejection, but demonstrates how the regulator is building a structured approach to the launch of digital asset-linked ETFs. After the creation of a reliable regulatory framework, it is very likely that the GDLC will actually be converted into ETFs. However, at the moment, the date when this will happen is not yet known.
