The U.S. Securities and Exchange Commission (SEC) has temporarily halted the approval process for Grayscale’s proposal to convert its Digital Large Cap Fund into a spot exchange-traded fund (ETF) on NYSE Arca, pending further review.
In a letter dated July 2, the SEC announced it would re-examine a July 1 decision by the Division of Trading and Markets that had granted accelerated approval for the conversion under delegated authority. That decision is now stayed until the full Commission determines whether to affirm or overturn it.
Grayscale’s Digital Large Cap Fund, which launched in 2018 and has traded over-the-counter under the ticker GDLC since 2019, had just received the go-ahead to operate as a fully regulated ETF. The fund tracks the CoinDesk 5 Index and, at the time of approval, was composed of approximately 80% Bitcoin (BTC), 11.4% Ethereum (ETH), 4.8% XRP (XRP), 2.8% Solana (SOL), and 0.8% Cardano (ADA).
The ETF conversion effort is part of Grayscale’s broader initiative to shift its crypto trusts into more regulated investment vehicles. In 2023, the company successfully sued the SEC over its earlier denial of a spot Bitcoin ETF, prompting a court-mandated review of that rejection.
Had the conversion gone through, the fund would have traded on NYSE Arca with daily share creation and redemption, settled in cash—offering greater liquidity and flexibility than its current structure.
With the SEC’s stay in place, however, the conversion is effectively on hold. The agency has not provided a timeline for when it will complete its review or deliver a final decision.
The delay injects further uncertainty into the crypto ETF space, affecting not only Grayscale but also other asset managers with similar applications in the pipeline, including Bitwise, Hashdex, and Franklin Templeton.
For now, Grayscale’s Digital Large Cap Fund will continue to operate in its existing over-the-counter format.
