SEC Pauses Bitwise Crypto ETF After Initial Approval

Bitwise ETF Conversion Faces Unexpected Delay

The US Securities and Exchange Commission approved and then immediately paused the conversion of Bitwise's cryptocurrency index fund into an exchange-traded fund, creating uncertainty for investors and the broader crypto ETF market.

The SEC's Division of Trading and Markets granted accelerated approval for the Bitwise 10 Crypto Index fund conversion on Tuesday. This accelerated approval would have allowed Bitwise to request an earlier effective date than the standard regulatory timeline.

However, the same day, SEC assistant secretary Sherry Haywood issued a stay order, stating the approval "is stayed until the Commission orders otherwise" and that the "Commission will review the delegated action."

What is the Bitwise 10 Crypto Index Fund

The Bitwise 10 Crypto Index Fund, trading under ticker BITW, provides exposure to various cryptocurrencies including Bitcoin and Ethereum. Bitwise initially filed to convert this fund into an ETF format in November 2024.

The fund represents one of several cryptocurrency investment vehicles seeking ETF status as the regulatory landscape continues to evolve under new SEC leadership.

Situation Mirrors Grayscale ETF Complications

Bloomberg ETF analyst James Seyffart explained that the Bitwise ETF has been "stayed by either one or multiple commissioners," preventing the actual conversion to ETF status. He noted the decision came earlier than expected, as it wasn't scheduled for review until the following week.

The situation parallels the Grayscale Digital Large Cap ETF conversion delay, which was approved on July 1 and then paused shortly after. NovaDius Wealth Management president Nate Geraci called both situations "bizarre" and suggested both conversions should be allowed to proceed.

Industry Speculation on SEC Motives

Investment professionals have offered various theories about the pause. Scott Johnsson from Van Buren Capital suggested the approval might have been processed under delegated authority to avoid potential disruption from SEC Commissioner Caroline Crenshaw.

Another theory suggests the SEC, now under Chairman Paul Atkins, might be using the pause to navigate around the 240-day statutory approval period.

Bloomberg ETF analyst Eric Balchunas believes the SEC may be stalling to develop generic listing standards for crypto ETFs before proceeding with individual approvals.

Broader Crypto ETF Regulatory Environment

The Bitwise situation occurs amid broader discussions about crypto ETF regulations. The SEC recently extended deadlines for ruling on in-kind redemptions for Bitwise's Bitcoin and Ethereum spot ETFs.

Industry reports suggest stock exchanges, fund managers, and the SEC are exploring ways to simplify the ETF approval process for select cryptocurrency investment vehicles. This potential expedited process could automate portions of current application procedures and allow certain ETF issuers to bypass traditional 19b-4 filings.

Market Impact and Future Outlook

The pause creates uncertainty for investors awaiting more accessible crypto investment options through traditional ETF structures. The situation highlights ongoing regulatory challenges facing cryptocurrency investment products despite increasing institutional adoption.

The outcome of the Bitwise review could set precedents for other pending crypto ETF applications and influence the broader regulatory approach toward cryptocurrency investment vehicles.

As the SEC continues to evaluate its approach under new leadership, market participants are closely watching for signals about future crypto ETF policy direction and approval timelines.

For more Crypto, Web3, Blockchain & AI news visit : www.metamoonmedia.com