Bitwise Crypto ETF Faces Sudden Pause After Surprise Approval by the SEC

The U.S. SEC has approved, then abruptly paused, the conversion of Bitwise’s crypto index fund into an exchange-traded fund (ETF), leaving the process in uncertainty as the agency reviews its own decision.

On Tuesday, the agency’s Division of Trading and Markets granted accelerated approval for Bitwise’s plan to convert its Bitwise 10 Crypto Index Fund (BITW) into an ETF, allowing Bitwise to request an early effective registration date

However, on the same day, SEC assistant secretary Sherry Haywood issued a letter stating the “order is stayed until the Commission orders otherwise,” indicating the SEC will review the delegated approval internally.

Approval and Immediate Suspension Create Uncertainty

Bitwise’s fund, which offers diversified exposure to cryptocurrencies such as Bitcoin and Ether, filed for conversion to an ETF in November, aiming to transition its index fund into a structure that could attract broader investor participation

Bloomberg ETF analyst James Seyffart noted that the SEC acted sooner than expected, as a decision was originally due next week, but clarified that the approval had been stayed by “one or multiple commissioners,” preventing immediate conversion.

Nate Geraci, president of NovaDius Wealth Management, described the situation as “bizarre,” drawing parallels to the Grayscale Digital Large Cap ETF, which faced a similar pause after its approval on July 1.

Speculation Grows Around SEC Motives

The pause has fueled speculation within the industry regarding the SEC’s intentions. Scott Johnsson of Van Buren Capital speculated that the approval was granted under delegated authority to preempt potential disruptions from Commissioner Caroline Crenshaw, the sole Democrat on the panel, or alternatively, to navigate around the statutory 240-day approval timeline.

Bloomberg’s Eric Balchunas suggested the SEC may be delaying conversions while it finalizes generic listing standards for crypto ETFs, anticipating a rollout before October deadlines. The SEC has recently been engaging with fund managers, stock exchanges, and internal teams to streamline ETF approval processes for crypto vehicles, including potentially automating parts of the application process to bypass 19b-4 filings.

Additionally, the SEC extended its review timeline on in-kind redemption structures for Bitwise’s Bitcoin and Ether spot ETFs on July 17, adding to the regulatory complexity surrounding crypto ETF approvals.

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