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Bitwise ETF Approval Reversed
In a surprise twist, the U.S. Securities and Exchange Commission (SEC) abruptly halted its own approval of the Bitwise 10 Crypto Index Fund conversion into a spot exchange-traded fund (ETF) just hours after greenlighting it. The move came under Rule 431, which allows the Commission to stay delegated decisions for full review, a practice now drawing criticism from both industry players and investors.
Bitwise’s proposal sought to convert its over-the-counter fund (BITW) into a listed ETF on NYSE Arca, offering broader investor access, increased transparency, and potential fee reductions. The initial approval by the SEC’s Division of Trading and Markets was hailed as a step forward for multi-asset crypto ETFs in the U.S.
However, later that same day, the SEC’s Office of the Secretary issued a notice of review, effectively suspending the conversion pending full Commission deliberation.
This reversal not only shocked the market but also fueled ongoing frustrations over the SEC’s seemingly inconsistent stance on crypto ETF products. Analysts suggest this may be a stalling tactic until the agency creates a formal framework for listing digital asset ETFs.
What Is the BITW Fund?
The Bitwise 10 Crypto Index Fund, trading under ticker BITW, was launched in 2017. It aims to track the ten largest crypto assets by market cap, excluding stablecoins and wrapped tokens. As of June 2025, the fund held:
- Bitcoin (BTC) and Ethereum (ETH) (combined ~90% weight)
- XRP, Solana (SOL), Cardano (ADA), Chainlink (LINK), Avalanche (AVAX), Litecoin (LTC), and Polkadot (DOT)
It rebalances monthly and reflects the crypto market’s most significant assets, making it a diversified play for investors seeking exposure beyond Bitcoin and Ethereum.
The planned ETF conversion would have allowed BITW to trade under amended Rule 8.500‑E on NYSE Arca, following in the footsteps of approved Bitcoin ETFs earlier this year.
Moreover, the SEC’s initial approval noted that the fund met key requirements—85% of assets held in commodities already approved in other ETFs (primarily BTC and ETH), further strengthening Bitwise’s case.
Why Did the SEC Stall?
This isn’t the first time the SEC has backtracked after a delegated approval.
- On July 1, the agency’s Division of Trading and Markets approved Grayscale’s request to convert its Digital Large Cap Fund (GDLC) into an ETF.
- A day later, that decision was also stayed under Rule 431, halting progress pending a full Commission review.
Both funds—GDLC and BITW—are diversified crypto funds with major holdings in Bitcoin, Ethereum, Solana, and XRP. The repeated pattern is fueling concern that the SEC is using Rule 431 to indefinitely delay ETF conversions without providing concrete rationale.
Grayscale, for instance, accused the SEC of harming investors with delays and even hinted at pursuing legal options if the impasse continues.
Bitwise has not yet commented publicly on the July 22 decision.
Experts Question SEC Strategy
The SEC’s opaque actions have ignited backlash from the crypto and ETF communities. Scott Johnsson of Van Buren Capital suggested the stays may have been pre-planned to delay approvals without outright rejection, citing internal resistance possibly from Commissioner Caroline Crenshaw, known for her anti-crypto stance.
James Seyffart, a Bloomberg Intelligence analyst, speculated that the SEC may be stalling until it finalizes a comprehensive digital assets ETF framework. He proposed that the agency is trying to establish a generic listing standard for what digital assets can be held inside ETF wrappers, as well as how they should be evaluated.
Meanwhile, Nate Geraci, co-founder of The ETF Institute, called the move a “bizarre situation” and urged the SEC to stop stalling and uplist these multi-asset funds, which would significantly broaden access to digital assets for retail and institutional investors.
Staking ETFs Also Face Delays
Bitwise’s other ETF proposals are also facing delays—most notably its Ethereum staking ETF.
On June 30, the SEC delayed its decision on Bitwise’s proposal to allow staking rewards within a spot ETH ETF. Instead of making a ruling, the agency opened the proposal for public comment, signaling additional concerns over the risks and operational mechanics associated with staking.
The delay has once again emphasized the SEC’s hesitance toward innovation, particularly when products involve non-traditional revenue streams like staking. Critics argue that this reluctance will continue to hinder U.S. leadership in the digital asset space.
What’s Next for Bitwise and Others?
Bitwise now joins a growing list of ETF issuers waiting in regulatory limbo. The Commission’s actions suggest that while it may be softening on spot crypto ETFs, it is still uncomfortable with broader exposure and newer mechanisms like staking and diversified crypto baskets.
Should the SEC continue using Rule 431 to halt progress, legal challenges or Congressional oversight may intensify. Grayscale’s 2023 victory against the SEC in court for its Bitcoin ETF denial set a precedent that could be revived.
Until then, the fate of Bitwise’s ETF ambitions—and indeed the future of crypto ETFs in the U.S.—rests with a Commission that appears divided and cautious.
Conclusion
The SEC’s stay of Bitwise’s ETF conversion shines a spotlight on the regulatory uncertainty facing the crypto market. Despite satisfying most listing requirements, Bitwise’s BITW will remain an over-the-counter product, at least for now.
As calls for a transparent digital asset ETF framework grow louder, the pressure is mounting on the SEC to clarify its position and end the cycle of approval and reversal.
For investors, the delay is yet another reminder that while crypto is gaining mainstream traction, regulatory clarity remains elusive—especially when it comes to multi-asset and staking-enabled ETFs.