SEC's Pause of Grayscale Fund Is Likely Temporary

The U.S. Securities and Exchange Commission likely halted the launch of the Grayscale Digital Large Cap Fund (GDLC) for administrative reasons, not political ones, multiple individuals familiar with the matter told CoinDesk.

The SEC approved GDLC to uplist as an exchange-traded fund (ETF) on Tuesday through staffers' delegated authority, meaning the regulator's commissioners did not have to vote on the application. Nevertheless, the regulator informed Grayscale and the New York Stock Exchange — GDLC's listing partner — on Wednesday that the SEC's commissioners will review the approval, pausing GDLC's go-live date in the meantime.

GDLC is based on CoinDesk Indices' CoinDesk 5 Index.

Halting the launch gives the SEC time to develop listing standards for other ETFs that would launch under the same mechanism, the individuals said.

There's also the fact that GDLC contains two digital assets — XRP XRP and Cardano ADA — that don't currently have their own individual ETFs. Two of the other assets in the basket, Bitcoin BTC and Ethereum ETH, have had their own ETFs since 2024, and the SEC has even previously okayed funds containing both of those assets. Solana SOL also saw its first ETF launch earlier this week, though applications for other ETFs tied to the asset remain under SEC review.

The SEC faces deadlines later this year for the XRP, ADA and SOL applications.

James Seyffart, Bloomberg Intelligence ETF analyst, told CoinDesk that the SEC’s pause was “not normal.” In a post on X, he wrote that there are two potential reasons behind the move.

“The SEC doesn't want to let anything to launch under the 19b-4 process until they officially approve or come up with some framework for digital assets in the ETF wrapper.” The other option, he wrote, is that the SEC wants to work on something in relation to a specific aspect of the fund itself, for example the structure.

In a statement, a Grayscale spokesperson said the SEC's pause "was unexpected" but "reflects the dynamic and evolving nature of the regulatory landscape surrounding a first-of-its-kind digital asset product like GDLC."

"Grayscale remains committed to pursuing the listing of GDLC as an ETP and we are working closely with key stakeholders to meet all necessary requirements. We will provide further updates as additional information becomes available," the spokesperson said.

An 8-K filing from Grayscale said the firm "remains committed to pursuing the listing of the Fund on NYSE Arca and continues to work closely with key stakeholders to obtain approval of the application."