03.07.2025 11:20
The U.S. Securities and Exchange Commission (SEC) unexpectedly reversed its approval of Grayscale Investments' application to transform its Digital Large Cap Fund (GDLC) into a spot Bitcoin and altcoin exchange-traded fund (ETF). This about-face, coming just one day after granting initial approval, has cast a significant shadow over the anticipated growth of crypto-based ETFs and left market participants reeling.
Initially, the SEC's Division of Trading and Markets, acting under delegated authority, swiftly approved NYSE Arca's rule change on July 1st. This paved the way for the listing and trading of the GDLC ETF, marking what many considered a monumental step toward broader cryptocurrency market regulation. The approval signaled the conversion of Grayscale's existing closed-end fund into a regulated ETF providing diversified exposure to prominent cryptocurrencies such as Bitcoin, Ethereum, Solana, XRP, and Cardano. Analysts widely anticipated its imminent launch, viewing it as a potential precursor to future single-asset altcoin ETFs.
However, this celebratory atmosphere quickly dissipated. A subsequent letter, also dated July 1st, from Deputy Secretary J. Matthew DeLesDernier, revealed a crucial detail overlooked in the initial reporting: the SEC would be reviewing the delegated approval. This review, pursuant to Rule 431 of the Commission's Rules of Practice, effectively placed a temporary hold on the conversion, preventing Grayscale from proceeding with its plans. The letter explicitly stated that the July 1st order was stayed, pending further commission orders.
The sudden reversal has prompted considerable speculation. Industry experts have suggested several possible explanations, including internal disagreements within the SEC. One theory posits that a lack of coordination between different SEC departments might have resulted in the conflicting decisions. The SEC's actions underscore the complexities and uncertainties inherent in the evolving regulatory landscape surrounding cryptocurrencies, leaving the future of this, and similar ETF applications, uncertain.
