Grayscale Investments has submitted an official letter to the U.S. Securities and Exchange Commission (SEC), insisting on the final approval for the conversion of its Grayscale Digital Large Cap Fund LLC (GDLC) trust into a spot exchange-traded fund (ETF) based on five major cryptocurrencies.
This is reported by Business • Media
Reasons for SEC Delays
GDLC is an investment product focused on a portfolio of Bitcoin, Ethereum, Solana, Cardano, and XRP. Grayscale has emphasized that the delay in decision-making negatively impacts both the company and investors, which they believe constitutes a violation of regulatory norms. After initially approving the application, the SEC suspended the process of converting the trust into a spot ETF. Bloomberg Intelligence experts believe that the reasons for the delay may either relate to specific issues with Grayscale’s product or the SEC’s desire to create a general mechanism for launching spot ETFs based on altcoins.
Legal Aspects and Review Prospects
In its letter to the SEC, the company references the provisions of Section 19(b)(2)(D) of the Exchange Act, which establishes a maximum review period for such applications of 240 days. The SEC’s Division of Trading and Markets agreed to the conversion of GDLC on July 1, on the 239th day after the submission of the document. Furthermore, according to Grayscale’s lawyers, any further delay in the process contradicts legal requirements.
“Grayscale, the exchange, and current trust investors are incurring losses due to the delay in the public launch, and therefore we are considering filing a petition with the Commission to lift the moratorium imposed by Rule 431(e) while the Commission reviews the actions taken under delegated authority, so that the fund can begin operations immediately while this review is ongoing.”
As of now, the SEC has not provided any official comment regarding the situation with the conversion of GDLC. Grayscale Investments submitted its application on October 15, 2024. Shortly after, Bitwise also filed an application for a similar crypto ETF; however, if approved, Grayscale’s proposal will be the first.