In a significant development, Grayscale's efforts to convert its Digital Large Cap Fund into a Spot ETF faced a twist. Just one day after the U.S. SEC approved the asset management company’s conversion of its fund containing Bitcoin(BTC), Ether(ETH), Solana(SOL), Ripple(XRP), and Cardano(ADA), the SEC suddenly halted the process.
SEC issues a suspension order, conversion hindered
The SEC notified the NYSE Group (New York Stock Exchange Group) in a letter that it has issued a Stay Order on Grayscale's proposal to convert its Digital Large Cap Fund into a Spot ETF. The SEC stated that this action is to reevaluate the authorization decision of its subordinate department (deleGated action).
This suspension comes right after the SEC approved Grayscale's conversion fund and the decision to allow the NYSE to list the ETF shares. The fund includes five types of cryptocurrency assets, and if the conversion is successful, it will be the first spot ETF to provide exposure to ADA and XRP. The SEC stated that the suspension will remain in effect until further notice.
This essentially means that, although Grayscale has received preliminary approval from the SEC, it is still unable to convert its Digital Large Cap Fund into an ETF. Therefore, it must wait for further instructions from the SEC before the fund can be listed on the NYSE.
What is the reason behind the SEC's suspension order?
Bloomberg analyst James Seyffart ( analyzed several possible reasons for the SEC's suspension order on platform X:
Regulatory Framework Not Ready? The SEC may not want to approve the listing of any cryptocurrency ETF based on the 19b-4 process before it is officially launched, unless a clear regulatory framework for digital asset ETF packaging has been approved or established by officials. Reportedly, as part of this framework, the SEC is working with exchanges to develop streamlined listing standards for cryptocurrency ETFs, aiming to reduce the approval time from the usual 240 days to under 75 days.
Approval under deadline pressure? Seyffart speculated that the SEC approved Grayscale's conversion application possibly because the final deadline (which is today) is approaching. He believes that the regulatory agency does not want to directly reject the application, but they are not actually ready to welcome the launch of the multi-coin ETF.
Questions about fund structure or specific details? Another possibility is that the SEC wants to conduct additional scrutiny on a specific aspect of the fund itself (fund structure). He pointed out that the approval order for 19b-4 comes from the SEC's Division of Trading and Markets, while other departments (such as the Division of Corporation Finance) may not be ready to allow Grayscale to immediately convert the crypto asset fund.
Industry Impact: XRP ETF and ADA ETF Still Awaited
The recent suspension order has doused cold water on the crypto community and digital asset holders who are looking forward to a Spot cryptocurrency ETF (especially investors seeking XRP investment and Cardano investment channels). If Grayscale's fund successfully converts, it will be the first Spot ETF to include mainstream altcoins such as XRP and ADA. Currently, all cryptocurrency investors monitoring the Spot ETF progress can only continue to wait for the SEC's final decision.
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SEC slams the brakes! Grayscale's multi-coin Spot ETF halted just 24 hours after approval.
In a significant development, Grayscale's efforts to convert its Digital Large Cap Fund into a Spot ETF faced a twist. Just one day after the U.S. SEC approved the asset management company’s conversion of its fund containing Bitcoin(BTC), Ether(ETH), Solana(SOL), Ripple(XRP), and Cardano(ADA), the SEC suddenly halted the process.
SEC issues a suspension order, conversion hindered The SEC notified the NYSE Group (New York Stock Exchange Group) in a letter that it has issued a Stay Order on Grayscale's proposal to convert its Digital Large Cap Fund into a Spot ETF. The SEC stated that this action is to reevaluate the authorization decision of its subordinate department (deleGated action).
This suspension comes right after the SEC approved Grayscale's conversion fund and the decision to allow the NYSE to list the ETF shares. The fund includes five types of cryptocurrency assets, and if the conversion is successful, it will be the first spot ETF to provide exposure to ADA and XRP. The SEC stated that the suspension will remain in effect until further notice. This essentially means that, although Grayscale has received preliminary approval from the SEC, it is still unable to convert its Digital Large Cap Fund into an ETF. Therefore, it must wait for further instructions from the SEC before the fund can be listed on the NYSE.
What is the reason behind the SEC's suspension order? Bloomberg analyst James Seyffart ( analyzed several possible reasons for the SEC's suspension order on platform X:
Industry Impact: XRP ETF and ADA ETF Still Awaited The recent suspension order has doused cold water on the crypto community and digital asset holders who are looking forward to a Spot cryptocurrency ETF (especially investors seeking XRP investment and Cardano investment channels). If Grayscale's fund successfully converts, it will be the first Spot ETF to include mainstream altcoins such as XRP and ADA. Currently, all cryptocurrency investors monitoring the Spot ETF progress can only continue to wait for the SEC's final decision.