XRP News Today: SEC Halts Grayscale ETF Conversion After Initial Approval

The US Securities and Exchange Commission (SEC) has unexpectedly halted the approval of the Grayscale Digital Large Cap Fund’s conversion into an exchange-traded fund (ETF), just one day after initially giving the green light. On July 1, the SEC’s Division of Trading and Markets approved the NYSE Arca’s proposal to list and trade shares of the Grayscale fund under an amended rule, with accelerated status indicating initial confidence in the product’s market readiness. However, within 24 hours, the Commission exercised its right to review the decision, automatically staying the approval under Rule 431 of the SEC’s Rules of Practice.

This reversal introduces an unexpected turn in what was celebrated as a significant milestone for multi-asset crypto ETFs in the US. The Grayscale Digital Large Cap Fund, launched in 2018, holds a diverse portfolio of top cryptocurrencies, with Bitcoin and Ethereum constituting over 91% of its holdings. The remaining portion includes altcoins such as XRP, Solana, and Cardano, each with varying degrees of regulatory uncertainty. The SEC’s intervention suggests that the conversion requires closer scrutiny beyond what staff-level approval typically entails. Historically, such reviews are rare and often indicate internal debates over regulatory implications, investor protection, or market readiness.

Unlike single-asset ETFs, multi-asset products like Grayscale’s introduce new complexities. The inclusion of tokens with unsettled legal status, such as XRP and Solana, may have raised concerns about clarity in investor disclosures or the legal treatment of underlying assets. Some analysts believe the Commission’s caution reflects a broader effort to establish a unified regulatory approach before allowing more diversified crypto products to enter the market. Bloomberg’s Eric Balchunas has suggested that the SEC is delaying the GDLC’s ETF conversion until a more consistent regulatory framework for crypto ETPs is in place.

Grayscale’s ETF bid comes at a time of renewed momentum for digital asset firms under a more crypto-friendly political backdrop. However, the Commission’s move underscores that regulatory rigor continues to influence the timing of such developments. For Grayscale and NYSE Arca, the stay means an indefinite delay, with the SEC providing no timeline for its review or additional guidance on next steps. The SEC’s actions highlight the ongoing regulatory scrutiny and the need for a clearer framework before more complex crypto products can be widely adopted.