SEC's Temporary Halting of Solana and XRP ETF Trading Labeled as Unexpected by Grayscale
In an unexpected turn of events, the U.S. Securities and Exchange Commission (SEC) has temporarily halted the trading of Grayscale's Digital Large Cap Fund (GDLC). The move was announced on July 2, 2025, following the initial approval of the ETF conversion on July 1.
The GDLC, which holds assets such as Bitcoin, Ethereum, Solana, XRP, and Cardano, is now on hold until further notice from the Commission. This decision comes amidst ongoing discussions within the SEC regarding the regulation and oversight of crypto-based ETFs, particularly those containing assets like Solana, XRP, and Cardano, which are already under regulatory scrutiny or litigation.
Industry analysts, including James Seyffart of Bloomberg Intelligence, suggest that the SEC may be seeking to establish clearer guidelines or a specific framework for digital assets within the ETF structure before allowing further launches under the 19b-4 process. This approach is intended to avoid setting precedents that might complicate future oversight as the regulatory environment evolves.
Grayscale, in a statement, described the SEC’s action as "unexpected," noting that it reflects the dynamic and evolving nature of digital asset regulation. The pause signals a potential shift or reevaluation in the SEC’s approach to pioneering digital asset products.
The GDLC, initially modeled on the CoinDesk 5 Index, has seen significant growth since its inception. Bitcoin composes more than 80% of the fund's holdings, while Ethereum accounts for around 12%. Smaller shares are allocated to Solana, XRP, and Cardano, making up approximately 2.8%, 4.8%, and 0.8% of the ETF's assets, respectively.
It's important to note that this is not the first time Grayscale has navigated regulatory hurdles. In 2023, the company sued the SEC over repeated denials to convert its fund into a full-fledged ETF, a courtroom victory that led to the SEC's approval of spot Bitcoin ETFs the following year.
As the SEC continues to navigate the complexities of digital asset regulation, the future of crypto-based ETFs remains uncertain. The SEC has shown receptiveness to funds that primarily invest in established cryptocurrencies like Ethereum and Bitcoin, but has yet to approve ETF applications focusing solely on smaller altcoins.
**Key Facts**
- Fund Name: Grayscale Digital Large Cap Fund (GDLC) - Major Holdings: Bitcoin (~80%), Ethereum (~12%), XRP, Solana, Cardano (smaller shares) - Initial Approval: ETF conversion approved by SEC on July 1, 2025 - Suspension: Trading paused on July 2, 2025, “until the Commission orders otherwise” - Stated Reasons: Regulatory prudence, need for clearer digital asset ETF frameworks, internal SEC review
[1] Bloomberg, July 2, 2025. [2] Grayscale, Press Release, July 2, 2025. [3] SEC Letter to NYSE Arca, July 2, 2025. [4] CNBC, July 2, 2025.
- The United States Securities and Exchange Commission (SEC) has temporarily halted the trading of the Grayscale Digital Large Cap Fund (GDLC), a digital asset-focused ETF that includes Bitcoin (BTC), Ethereum (ETH), Solana, XRP, and Cardano.
- The Securities and Exchange Commission (SEC) has cited regulatory prudence and the need for clearer digital asset ETF frameworks as the reasons for the GDLC's suspension, while internal SEC review is also underway.
- The GDLC, initially modeled on the CoinDesk 5 Index, has seen significant growth since its inception, with Bitcoin making up more than 80% of the fund's holdings and Ethereum accounting for around 12%.
- This is not the first time Grayscale has faced regulatory challenges. In 2023, the company sued the SEC over repeated denials to convert its fund into an ETF, leading to the SEC's approval of spot Bitcoin ETFs the following year.
- Industry analysts suggest that the SEC may be seeking to establish clearer guidelines or specific frameworks for digital assets within the ETF structure before allowing further launches.
- The SEC has shown receptiveness to funds that primarily invest in established cryptocurrencies like Ethereum and Bitcoin, but still has yet to approve ETF applications focusing solely on smaller altcoins.
- As the regulatory environment evolves, the future of crypto-based ETFs like Grayscale's GDLC remains uncertain.
- The pause in GDLC trading could signal a potential shift or reevaluation in the SEC’s approach to pioneering digital asset products, including smart contracts, dapps, ico, staking, and other aspects of technology and finance within this growing industry.
