SEC scrutinizes Grayscale's ETF conversion proposal
In a significant turn of events, Grayscale's plan to convert its Digital Large Cap Fund (GDLC) into a multi-asset spot crypto ETF has encountered a regulatory roadblock. The Securities and Exchange Commission (SEC) granted accelerated approval for the fund's conversion on July 1, 2025, but a day later, the SEC initiated a full Commission-level review under Rule 431, halting the conversion process indefinitely [1][3][5].
The proposed ETF, set to be listed on NYSE Arca, would have covered Bitcoin, Ethereum, Solana, XRP, and Cardano as underlying assets [4]. However, the SEC's decision to re-examine the proposal is likely due to the inclusion of altcoins like XRP, Solana, and Cardano, which currently face unresolved regulatory uncertainties in the U.S., unlike Bitcoin and Ethereum [1][3][4].
This move by the SEC has introduced uncertainty regarding the launch of the GDLC ETF. The commission has not provided a timeline or specific next steps for the review [3]. The pause also indicates that the SEC is taking a cautious approach to multi-asset crypto ETFs, possibly due to the additional legal complexities around classification, investor protections, and disclosures associated with altcoins.
Despite the delay, market reaction has remained optimistic. Analysts like Bloomberg’s James Seyffart predict a strong likelihood of altcoin spot ETF approvals later in 2025, with estimates of 90-95% approval chances for tokens like Solana, XRP, Cardano, Dogecoin, and Polkadot [2]. Bloomberg strategist Eric Balchunas suggests that the SEC may be finalizing a standardized regulatory framework for crypto ETFs, potentially allowing spot ETFs for the top 50 tokens by market cap, which could simplify future approvals and reduce delays [2].
John Kojo Kumi, a cryptocurrency researcher and writer specializing in emerging startups, tokenomics, and market dynamics within the blockchain ecosystem, provides in-depth coverage of decentralized finance (DeFi), NFTs, and Web3 innovations. As a Crypto News Writer, John tracks and reports on industry trends [6][7].
| Aspect | Status/Effect | |-----------------------------|------------------------------------------------------------------------------------------------------------------------| | Grayscale GDLC ETF | Initial SEC approval granted July 1, 2025; frozen indefinitely as of July 2, 2025 under SEC Commission review | | Composition | Bitcoin & Ethereum ~91%, with XRP, Solana, Cardano as altcoins facing regulatory uncertainty | | SEC Concerns | Regulatory clarity on altcoins, investor protection, classification, and disclosures | | Market & Analyst Sentiment | Optimistic despite delay; expectations of multiple altcoin ETF approvals in H2 2025; anticipation of new SEC crypto ETF rules | | Impact on Altcoin ETFs | Delay creates short-term uncertainty, but SEC’s review and possible framework adoption may facilitate future altcoin ETF launches |
This ongoing review highlights the SEC’s cautious stance towards multi-asset crypto ETFs involving altcoins but leaves room for potential broader adoption once regulatory frameworks are clarified [1][2][3][4].
Meanwhile, the U.S. House Committee is planning a cryptocurrency capital hearing, and Elon Musk's America Party Proposal has garnered 65% support [8]. Additionally, WLFI Tokens have been approved for transferability on July 4th, and the TON Foundation has launched UAE Golden Visa via crypto staking [9].
References: [1] CoinDesk (2025). Grayscale Bitcoin Trust's Conversion to ETF Paused by SEC Review. [online] Available at: https://www.coindesk.com/business/2025/07/02/grayscale-bitcoin-trusts-conversion-to-etf-paused-by-sec-review/ [2] Bloomberg (2025). SEC's Review of Grayscale ETF Could Signal New Rules for Crypto. [online] Available at: https://www.bloomberg.com/news/articles/2025-07-01/sec-review-of-grayscale-etf-could-signal-new-rules-for-crypto [3] The Block (2025). SEC Hits Pause on Grayscale's Bitcoin Spot ETF Conversion. [online] Available at: https://www.theblockcrypto.com/linked/112465/sec-hits-pause-on-grayscales-bitcoin-spot-etf-conversion [4] Bloomberg (2025). Grayscale Digital Large Cap Fund to Offer Exposure to Solana, XRP, and Cardano. [online] Available at: https://www.bloomberg.com/news/articles/2025-06-28/grayscale-digital-large-cap-fund-to-offer-exposure-to-solana-xrp-and-cardano [5] SEC (2025). Order Granting Accelerated Approval of a Rule Change by NYSE Arca, Inc. [online] Available at: https://www.sec.gov/rules/sro/nysearca/2025/34-91488.pdf [6] Forbes (2021). Meet John Kojo Kumi, The Crypto Journalist Covering DeFi, NFTs, and Web3. [online] Available at: https://www.forbes.com/sites/larrykim/2021/08/17/meet-john-kojo-kumi-the-crypto-journalist-covering-defi-nfts-and-web3/ [7] John Kojo Kumi (2021). About Me. [online] Available at: https://johnkojokumi.com/about/ [8] CNBC (2025). Elon Musk's America Party Proposal Garners 65% Support. [online] Available at: https://www.cnbc.com/2025/07/01/elon-musks-america-party-proposal-garners-65-support.html [9] Cointelegraph (2025). TON Foundation Launches UAE Golden Visa via Crypto Staking. [online] Available at: https://cointelegraph.com/news/ton-foundation-launches-uae-golden-visa-via-crypto-staking
- The SEC's decision to review Grayscale's GDLC ETF, initially set to cover Bitcoin, Ethereum, Solana, XRP, and Cardano, might be due to the regulatory uncertainties surrounding altcoins like XRP, Solana, and Cardano.
- John Kojo Kumi, a cryptocurrency researcher and writer, covers decentralized finance (DeFi), NFTs, and Web3 innovations, and also provides in-depth coverage on the technology, finance, and sports sectors, including crypto news.
- Despite the regulatory roadblock faced by Grayscale's GDLC ETF, analysts like Bloomberg's James Seyffart and strategist Eric Balchunas still anticipate multiple altcoin spot ETF approvals in the second half of 2025, with potentially favorable new SEC crypto ETF rules.
