It only took one day for the Securities and Exchange Commission (SEC) to turn it back into the approval given to the Grayscale Digital Large Cap Fund (GDLC) into an exchange sales fund (ETF) and accidentally halted the release.

On July 1, 2025, the SEC shared a letter indicating its intention to reconsider the recent approvals granted to GDLC and reconsider its intention to convert the fund into an ETF.

The SEC approval of Grayscale ETFs was hailed as a groundbreaking development for a US multi-asset cryptographic ETF. For beginners, grayscale brings a regulatory structure to products that track Bitcoin, Ethereum, and other major tokens by converting multi-asset crypto funds.

The initial approval of regulatory bodies indicates that the authorities are confident in preparing the product for the market. Nevertheless, it has decided to call Rule 431 of the SEC Rules of Practice to consider previous decisions.

Issues like breaking news from yesterday

– Despite initial clearance from SEC, I recently paused with plans to convert Grayscale’s Digital Large Cap Fund to ETF

A temporary pause does not necessarily mean rejection. It triggers more reviews.

– Salazar.ETH (@0xSalazar) July 3, 2025

The GDLC fund holds $755 million in Bitcoin, Ethereum, Solana, XRP and Cardano. According to some analysts, staff at the SEC agency approved the approval, not the commissioner, so it’s a callback.

In a letter to the New York Stock Exchange (NYSE), the SEC said: “This letter is to inform you that you will be reviewing the mandatory action in accordance with Rule 431 of the Committee’s Rule 17 CFR 201.431.”

Furthermore, “According to Rule 431(e) of July 1, 2025, the order will remain until the Commission orders.”

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Altcoin Exposure eliciates rare SEC reviews for grayscale ETF applications

The GDLC fund launched in 2018 includes a variety of cryptocurrencies, with over 91% of its holdings invested in Ethereum and Bitcoin. The rest consists of altcoins such as XRP, Solana, Cardano.

GDLC also includes cryptocurrencies established based on market size and adjusts changes quarterly. If approved, GDLC is a public ETF that allows investors to hold multiple crypto assets in one place.

Historically, such reversals are rare. They often manage ongoing internal discussions about investor protection, regulatory consistency and market stability. Altcoins pose varying degrees of risk, which could have been a trigger for SEC committee members to refuse staff-level approval.

The inclusion of assets like XRP and Solana is still controversial, but it may have sparked concerns about the legal treatment of underlying tokens and the clarity of disclosure as multi-asset products such as Grayscale.

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Bloomberg analysts believe the SEC is reevaluating the Grayscale ETF to develop clearer rules

Some analysts, such as Bloomberg’s Eric Barkunass, believe the SEC is reevaluating grayscale ETFs and developing clearer rules before allowing more complicated crypto funds. Baluchnas also speculates that regulators are waiting for a consistent standard for crypto investment products before giving a green signal to GDLC’s ETFs.

The plot becomes thicker. Highest Level of Seconds $ gdlc You cannot start it unless you are notified otherwise. I don’t know why, there is no information other than this letter. My guess: They want to issue Crypto ETP list criteria before the ’33 ACT Spot ETFs make it to the market with these other coins. It’s highly likely… https://t.co/za7ryk1o0e

– Eric Balchunas (@ericbalchunas) July 2, 2025

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Hong Kong lawmaker Johnny Ng has vowed that authorities will act quickly if fraud allegations against First Digital Trust (FDT), the issuer of the FDUSD stablecoin, are confirmed.

In an April 3 post on X, Ng assured investors that the city’s crypto regulatory framework remains robust and committed to investor protection despite the recent high-profile controversy.

According to him:

“Hong Kong has a legal basis and a healthy environment for protecting international investors and the Web3 industry. I urge international investors and tech practitioners not to worry about a single incident and to feel assured in continuing to invest and develop in Hong Kong.”

His comments follow accusations by Tron founder Justin Sun, who claims FDT mishandled client funds, prompting concerns about regulatory gaps in the city’s trust company oversight.

Ng acknowledged receiving multiple complaints this year involving suspected fraud tied to trust company practices. Considering this, he noted a clear need to review and strengthen the rules governing such firms.

He said:

“My office and the Anti-Fraud Alliance have indeed received more than one case this year involving suspected fraud utilizing the characteristics of trust companies. I believe there is a need to discuss how to improve the regulatory framework for relevant trust companies in the future to prevent criminals from exploiting loopholes for fraud.”

Justin Sun vs. First Digital Trust

On April 2, Sun claimed that FDT faced insolvency after allegedly misappropriating nearly $500 million in client funds.

According to Sun, FDT diverted Techteryx’s TrueUSD (TUSD) reserves by capitalizing on the inadequate regulatory oversight in Hong Kong’s crypto trust sector.

Sun said:

“This case shows that there appear to be clear loopholes in Hong Kong’s trust industry that can be used to circumvent financial and banking regulations. This not only poses risks to the public, but also threatens Hong Kong’s reputation as a global financial center.”

FDT, however, has pushed back firmly against the allegations.

In its response, the company dismissed Sun’s claims as false and unrelated to its FDUSD stablecoin.

FDT clarified that the dispute stems from TUSD operations and accused Sun of avoiding legal avenues in favor of a public smear campaign to damage its reputation.

The trust company stated:

“Justin Sun’s baseless accusations won’t distract from Techteryx’s own failures— our stablecoin FDUSD remains fully backed and solvent.”

FDT confirmed it is seeking legal counsel and will take steps to defend its business and reputation from what it called a misleading narrative.

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