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SEC Greenlights, Then Pauses Listing Crypto Fund Grayscale as an ETF

By  |  July 3, 2025

The Securities and Exchange Commission on Wednesday hit pause on an application it had approved the day before from crypto firm Grayscale to convert its Digital Large Cap Fund (DLCF) to an ETF. The pause order came in the form of a letter addressed to Grayscale senior counsel Le-Ahn Bui and posted on the SEC website.

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    “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. In accordance with Rule 431(e), the July 1, 2025 order is stayed until the Commission orders otherwise,” the notice read. “The Office of the Secretary will notify you of any pertinent action taken by the Commission.”

    The letter did not offer an explanation for the stay or indicate what additional steps the Commission may take.

    Grayscale had applied to convert the fund during the previous administration, but was repeatedly denied by the SEC. The company challenged the denials in a lawsuit filed against the regulator in 2023. The court ruled in its favor and questioned the agency’s logic in rejecting the application. In the wake of that ruling, the SEC approved some Bitcoin ETFs last year.

    While Bitcoin makes up 80% of the assets held by the DLCF, Ether accounts for 11%. The rest of its holdings include Solana, XRP, and Cardano.

    Related: Crypto Heavyweights Close to EU Licenses Amid Regulatory Tensions

    In its Tuesday order approving the conversion, the Commission said, “The Manager will ensure that, on an initial and continuing basis, as of 4:00 p.m. E.T. on every trading day, at least 85% of the Fund Components will consist of commodities that are the primary investment underlying exchange-traded products (“ETPs”) that have been approved by the Commission to list and trade on a national securities exchange.”

    Both Bitcoin and Ether have been approved as primary investments underlying exchange-traded products.

    Analysts quoted by Decrypt speculated that the sudden pause on the DLCF was related to the SEC’s not-yet completed development of a framework for issuing digital assets as ETFs. The Commission faced a Tuesday deadline for approving Grayscale’s application but may have wanted to hold off on its listing until the framework is ready.

    Other speculated that internal politics withing in SEC played a role, with one division approving the application while another wants to force changes to the product.

    The delay also comes as Congress is moving to define a broad legal framework for a digital asset issuance and trading and set out clear lines of authority among the various financial regulators. Two committees in the House voted recently to advance the CLARITY Act to establish a clear market structure for digital assets, though it is yet to receive a vote of the full House. The Senate recently passed the GENIUS Act to create a regulatory framework for the issuance and trading of crypto assets, but the bill is yet to be taken up by the House.