SEC Slams Brakes on Bitwise's Crypto ETF Dream: What's the Hold Up?

Just when you thought the U.S. Securities and Exchange Commission was ready to give the green light to the Bitwise 10 Crypto Index Fund's conversion, they hit the pause button. So, what's got the SEC spooked?

On July 22, the SEC's Division of Trading and Markets was all set to fast-track Bitwise's plan to transform its over-the-counter crypto index fund into a spot exchange-traded fund. Talk about a game-changer!

The move would've catapulted the fund onto NYSE Arca's stage under the revamped Rule 8.500-E, the big boss of Trust Units. This approval? A total milestone for multi-asset crypto ETFs in the U.S.

But hold your horses—later that very day, the SEC's Office of the Secretary dropped a bombshell, announcing that the full Commission would take a closer look at this delegated action.

Thanks to Rule 431 of the Commission's Rules of Practice, this review means an automatic freeze. So, the approval's on ice until the big shots decide whether to keep it, tweak it, or trash it.

What's the Deal with the Bitwise 10 Crypto Index ETF?

Launched back in 2017 and rocking the ticker BITW, this fund's all about tracking the performance of the top ten crypto assets, minus the stablecoins and wrapped tokens. No fluff, just the real deal.

It shakes things up monthly, and as of June 2025, nearly 90% of its portfolio was riding on Bitcoin and Ethereum. The rest? A mix of XRP, Solana, Cardano, Chainlink, Avalanche, Litecoin, and Polkadot.

Bitwise's master plan? Convert BITW from an over-the-counter product into a slick, regulated ETF. That means more investors get in on the action, and maybe even some sweet fee cuts.

The approval would've given NYSE Arca the thumbs up to list shares of the Bitwise 10 Crypto Index ETF.

According to the SEC's order, the fund ticked all the right boxes, holding at least 85% of its assets in digital commodities that were already the stars of approved ETFs, like Bitcoin and Ethereum.

Bitwise's master plan? Convert BITW from an over-the-counter product into a slick, regulated ETF. That means more investors get in on the action, and maybe even some sweet fee cuts.

Why Did the SEC Slam the Brakes?

This isn't the SEC's first rodeo. On July 1, the Commission's Division of Trading and Markets gave the nod to Grayscale's bid to turn its Digital Large Cap Fund (GDLC) into an ETF.

But just a day later, bam! The Commission hit pause on that decision too, using the same ol' Rule 431 trick. GDLC's mix? A blend of Bitcoin, Ethereum, XRP, Solana, and Cardano—just like BITW.

Issuers are getting fed up with the SEC's repeated use of Rule 431 to put the brakes on staff-level approvals. Grayscale's been vocal, warning that these delays are burning investors. They even hinted at taking legal action to get their fund trading ASAP.

Bitwise? They're staying tight-lipped on the latest hiccup.

Scott Johnsson from Van Buren Capital thinks the SEC might've planned these reversals all along, maybe bracing for a showdown with Commissioner Caroline Crenshaw, the known 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..."

On the flip side, Bloomberg Intelligence's James Seyffart reckons the SEC might be stalling while they hammer out a unified crypto ETF framework.

"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 mused in an X post.

Nate Geraci, co-founder of The ETF Institute, called the situation "bizarre" and urged the SEC to get a move on and "convert/uplist" the fund already.

SEC Puts Bitwise's Ethereum Staking ETFs on Hold Too

The Commission's juggling a ton of ETF proposals tracking all sorts of cryptocurrencies, but they're getting cold feet when it comes to the trickier stuff, especially staking mechanisms.

On June 30, the SEC threw a wrench in Bitwise's plans to introduce Ethereum staking into a spot ETF setup. Instead of making a call, they threw it open to public comment, wondering if staking rewards bring risks that traditional ETFs can't handle.