SEC Reviews Grayscale ETF Approval

SEC Halts Grayscale ETF Conversion

The U.S. Securities and Exchange Commission (SEC) is reviewing its recent approval of Grayscale's conversion of its Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF). This was announced in a July 1st letter to the New York Stock Exchange (NYSE).

The GDLC, holding $755 million in assets including Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP, and Cardano (ADA), was approved for conversion via delegated authority. This means SEC staff approved the conversion, bypassing a formal commission vote.

SEC Review Underway

The SEC's July 1st letter stated that the delegated action will be reviewed under Rule 431 of the Commission’s Rules of Practice. The letter also notes that the July 1st order is stayed until further notice from the Commission.

While the letter doesn't specify which commissioner(s) initiated the review, the SEC's actions signal a need for further scrutiny. This is not unprecedented, as past instances exist where commissioners requested reviews of ETF approvals or disapprovals.

Impact and Next Steps

The GDLC is benchmarked to CoinDesk's CoinDesk 5 Index. The SEC's review creates uncertainty for Grayscale and investors, leaving the future of this ETF temporarily unclear. Both Grayscale and the NYSE have yet to comment publicly. The SEC also declined to comment on the matter.

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