SEC Halts Grayscale Large Cap Fund ETF Conversion for Review

Highlights:

• Grayscale’s ETF conversion approval is now under review by SEC commissioners.
• The July 1 order is officially stayed until further notice from the SEC.
• GDLC holds major cryptocurrencies including Bitcoin, Ethereum, and Solana.

The U.S. Securities and Exchange Commission has stopped the uplisting of Grayscale’s Digital Large Cap Fund into an exchange-traded fund. The SEC issued a letter notifying the New York Stock Exchange that the approval, previously granted through delegated authority, is now under review. This decision places the ETF conversion on hold until the full Commission completes its evaluation.

Approval Stayed After Delegated Action

The SEC staff initially approved the ETF conversion without a commissioner vote using delegated authority. However, a July 1 letter confirms that the full Commission will now review the decision under Rule 431 of the SEC’s Rules of Practice. The order has been stayed immediately, pending further instructions.

The letter to the NYSE reads: “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.” It continues: “In accordance with Rule 431(e), the July 1, 2025 order is stayed until the Commission orders otherwise.” The SEC will inform the exchange of any new actions taken.

The letter did not disclose which commissioner initiated the review. Under SEC rules, any commissioner may request a review of staff-level decisions. This process has previously been used in cases involving ETF disapprovals.

Fund Composition and Strategic Goals

Grayscale’s Digital Large Cap Fund (GDLC) holds approximately $755 million in assets across major cryptocurrencies. The fund includes Bitcoin, Ethereum, XRP, Solana, and Cardano, and it tracks the CoinDesk 5 Index. Bitcoin makes up the largest share of the fund, accounting for over 80% of its weight.

Grayscale has worked to convert several of its crypto trusts into ETFs to close pricing inefficiencies. Investors often exploit price gaps between the fund’s trading price and its net asset value. By transitioning to ETFs, Grayscale aims to reduce arbitrage and align market value more closely with underlying assets.

Spokespeople for Grayscale and the NYSE did not respond to requests for comment. An SEC spokesperson also declined to elaborate on the decision.