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Shortly after approving the Bitwise 10 Crypto Index Fund conversion, the U.S. Securities and Exchange Commission paused the decision for a full Commission review. So, why is the SEC halting approvals?
Summary
- Bitwise’s ETF approval was halted just hours after clearance, leaving its multi-asset crypto fund in regulatory limbo.
- Grayscale’s GDLC faced a similar stay earlier this month, prompting the firm to warn that the delay could harm investors.
- The BITW index fund holds a market-cap-weighted basket of ten leading crypto assets, led by Bitcoin and Ethereum.
On July 22, the SEC’s Division of Trading and Markets granted accelerated approval for Bitwise’s proposal to convert its over-the-counter crypto index fund into a spot exchange-traded fund.
The move would have allowed the fund to list and trade on NYSE Arca under amended Rule 8.500‑E, which governs Trust Units. The approval was seen as a milestone for multi-asset crypto ETFs in the U.S.
However, later the same day, the SEC’s Office of the Secretary issued a notice stating that the Commission would review the delegated action.
Under Rule 431 of the Commission’s Rules of Practice, such a review results in an automatic stay. This means the approval is suspended until the full Commission decides whether to uphold, modify, or overturn it.
What is the Bitwise 10 Crypto Index ETF?
The Bitwise 10 Crypto Index Fund, launched in 2017 and trading under the ticker BITW, is designed to track the performance of the ten largest crypto assets, excluding stablecoins and wrapped tokens.
The fund rebalances monthly and, as of June 2025, held nearly 90% of its portfolio in Bitcoin and Ethereum. Other holdings included XRP, Solana, Cardano, Chainlink, Avalanche, Litecoin, and Polkadot.
Bitwise’s goal was to convert BITW from an over-the-counter product into a regulated ETF, allowing broader investor access and potential fee reductions.
The approval would have permitted NYSE Arca to list shares of the Bitwise 10 Crypto Index ETF.
According to the SEC’s order, the fund met key conditions, including holding at least 85% of its assets in digital commodities that already serve as the primary holdings of approved ETFs, such as Bitcoin and Ethereum.
Bitwise’s goal was to convert BITW from an over-the-counter product into a regulated ETF, allowing broader investor access and potential fee reductions.
Why did SEC issue the stay order?
This is not the first time the SEC has taken such action. On July 1, the Commission’s Division of Trading and Markets approved Grayscale’s request to convert its Digital Large Cap Fund (GDLC) into an ETF.
Just one day later, the Commission stayed the decision using the same Rule 431 process. Like BITW, GDLC holds a mix of Bitcoin, Ethereum, XRP, Solana, and Cardano.
The repeated use of Rule 431 to halt staff-level approvals has caused frustration among issuers, with Grayscale previously warning that the delay is harming investors. At the time, the issuer said it may consider filing a petition to force the regulator to allow its fund to begin trading as soon as possible.
Bitwise has not yet commented on the latest pause.
According to experts like Van Buren Capital’s Scott Johnsson, the SEC may have planned the reversals in advance, possibly anticipating opposition from Commissioner Caroline Crenshaw, who is widely known as a vocal crypto skeptic.
This is another crypto index ETP, and it's also been stayed pursuant to Rule 431 (same as Grayscale's Digital Large Cap) to review the delegated authority order. I have to wonder what is going on at the SEC. I can excuse GDLC as an unforeseen unilateral Crenshaw wrench, but this… https://t.co/92z37ZpaE8
— Scott Johnsson (@SGJohnsson) July 22, 2025On the other hand, Bloomberg Intelligence analyst James Seyffart speculated that the agency may be stalling as it finalises a unified framework for crypto ETFs.
“Might be the SEC’s way of stalling these things from becoming ETFs before they come up with a digital assets ETF framework. AKA some sort of generic listing standard for what digital assets are allowed in an ETF wrapper and what criteria they’ll use,” Seyffart said in an X post responding to Jhonsson.
Nate Geraci, co-founder of The ETF Institute, has called the development a “bizarre situation” and has urged the regulator to swiftly “convert/uplist” the fund.
SEC delayed Bitwise’s Ethereum staking ETFs
The Commission is currently reviewing a plethora of ETFs tracking the prices of various cryptocurrencies, but it has also shown hesitation when it comes to more complex proposals, particularly those involving staking mechanisms.
On June 30, the SEC delayed its decision on Bitwise’s proposal to allow Ethereum staking within a spot ETF structure. The agency instead opened the application to public comment, requesting feedback on whether staking rewards introduce risks that traditional ETFs are not equipped to manage.
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