Grayscale’s conversion of its Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF) has been frozen by a stay order, despite receiving approval from the Securities and Exchange Commission (SEC) on July 1.

Bloomberg ETF analyst James Seyffart said in a social media post on July 2 that the stay blocks the conversion “for now” and that the SEC gave no timeline for removal.

Two theories

Seyffart shared two working theories for the temporary block that came with the approval. The first is that staff in another division may still vet GDLC’s structure, or the SEC may prefer to keep every crypto listing on hold until it finishes a broader rule set for token-based ETFs.

Meanwhile, Bloomberg senior ETF analyst Eric Balchunas assessed that the SEC could be waiting for the first spot ETFs tracking Solana, Cardano, and XRP to hit the market before allowing Grayscale to trade its multi-asset fund.

The approval amended NYSE Arca Rule 8.500-E, allowing the trust’s units to trade on the exchange once the operational details are cleared. 

GDLC holds Bitcoin, Ethereum, Solana, XRP, and Cardano. Grayscale reports roughly $775 million in assets under management for the product. 

When the stay is lifted, the fund will transition to an in-kind creation and redemption format, replacing the current closed-end structure.

Standardized framework

Recent reports suggested that the  SEC and US exchanges are working on drafting a generic listing standard for token ETFs. 

Under the proposal, an issuer would file only a Form S-1, wait the customary 75 days, and launch if the registration becomes effective. The framework would allow issuers to sidestep the current Rule 19b-4 change each product now needs. 

Seyffart called the prospect “very good news” because a single standard would shorten timelines and supply clear thresholds for market capitalization, trading volume, and liquidity.

Other crypto basket funds, including filings submitted by Bitwise, Hashdex, and Franklin Templeton, are awaiting SEC approval.

Based on one of Seyffart’s theories, the regulator might be waiting to give GDLC full clearance so it can approve the other ETFs under the same standards.

Notably, the deadline for a decision on Bitwise’s filing expires on July 31, which could be a key date to watch and expect for the rumored framework.

Mentioned in this article