Grayscale Fund Pause by SEC Expected to Be Short-Lived

According to multiple sources familiar with the matter, the U.S. Securities and Exchange Commission's decision to pause the launch of the Grayscale Digital Large Cap Fund (GDLC) is likely due to administrative reasons rather than political motivations. The SEC had previously approved GDLC to be listed as an exchange-traded fund (ETF) through delegated authority, but has since decided to review the approval, thereby delaying the fund's launch. The GDLC is based on the CoinDesk 5 Index from CoinDesk Indices. This pause allows the SEC to establish listing standards for similar ETFs, which could be launched using the same mechanism. Notably, GDLC includes two digital assets, XRP and Cardano, that do not currently have individual ETFs, whereas other assets in the fund, such as Bitcoin and Ethereum, have had their own ETFs since 2024. The SEC is facing deadlines for reviewing applications related to XRP, ADA, and SOL later this year. An ETF analyst from Bloomberg Intelligence, James Seyffart, described the SEC's pause as unusual and suggested two possible reasons: either the SEC wants to wait until it has a framework for digital assets in ETFs or it needs to address a specific aspect of the fund. A Grayscale spokesperson characterized the pause as unexpected but reflective of the evolving regulatory landscape surrounding digital assets. Grayscale remains committed to listing GDLC as an exchange-traded product and is working closely with stakeholders to meet the necessary requirements.