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Highlights
- The SEC has put a stay order on Grayscale's proposed conversion of its Digital Large Cap Fund into an ETF.
- The Commission stated that it has to review the delegated action.
- This comes just a day after it gave the approval order for the NYSE to list and trade shares of the fund as an ETF.
In a massive development, a new twist has emerged in Grayscale’s push to convert its Digital Large Cap Fund into an ETF. This comes just a day after the SEC gave an approval order for the asset manager to convert this fund, which includes Bitcoin, Ethereum, Solana, XRP, and Cardano.
SEC Puts Stay Order On Grayscale Digital Large Cap Fund Conversion
In a letter addressed to the NYSE Group, the SEC has informed the exchange about the stay order on the asset manager’s proposed conversion of its Digital Large Cap Fund to an ETF. The Commission stated that it is making this stay order in order to review the delegated action.
This comes following the SEC’s approval order for Grayscale to convert the fund and for the NYSE to list and trade shares of the ETF. The fund, which includes five crypto assets, would have been the first spot ETF, which provides exposure to ADA and XRP. The agency stated that the stay order would be in effect until it orders otherwise.
This essentially means that Grayscale won’t be able to convert its Digital Large Cap Fund into an ETF just yet, despite the green light from the SEC. As such, the fund won’t go live on the NYSE until the Commission orders otherwise.
Possible Reasons For The SEC’s Stay Order
In an X post, Bloomberg analyst James Seyffart gave possible reasons for the stay order. First, he stated that the Commission might not want to let anything launch under the 19b-4 process until they officially approve or establish a framework for digital assets in the ETF wrapper.
As part of this framework, the SEC is reportedly working with exchanges to build a streamlined listing standard for crypto ETFs. This will enable crypto ETFs to list in under 75 days compared to the 240-day window that the Commission usually takes to approve the 19b-4s.
Seyaffrt further remarked that the SEC may have simply approved Grayscale’s Digital Large Cap Fund conversion because of the final deadline, which was coming up today. He opined that the agency didn’t want to deny the application, but that they just aren’t ready for a launch yet.
For the second theory, the Bloomberg analyst stated that there might be something the Commission wants to work on in relation to a specific aspect of the fund itself, possibly its structure. He noted that the 19b-4 approval order came from the Division of Trading and Markets and that it is possible that another division may not be ready for Grayscale to convert the fund just yet.
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