- The Securities and Exchange Commission has approved, then promptly halted, Bitwise’s bid to convert its 10‑Crypto Index Fund into a spot ETF
- The agency has paused the decision under Rule 431, requiring a full Commission review
- The move mirrors a similar action against Grayscale and has raised concerns over regulatory consistency
The Securities and Exchange Commission (SEC) has abruptly reversed course after approving a plan by Bitwise to convert its 10‑Crypto Index Fund into a spot ETF, invoking Rule 431 to place the approval on hold. The decision, which comes just a day after the fund received the green light from SEC staff, now awaits a full review by the Commission. This development, echoing a similar halt issued against Grayscale’s fund earlier this month, has triggered confusion and frustration among market participants, especially given the agency’s supposed crypto-forward posture.
Sudden Reversal Draws Scrutiny
On July 22, Bitwise received SEC approval to convert its 10‑Crypto Index Fund, traded under the ticker BITW, into a spot ETF, a move that would have expanded investor access to a diversified basket of cryptocurrencies. However, the approval was almost immediately suspended when the SEC invoked Rule 431, which allows the Commission to stay staff decisions pending further review. The fund, which holds roughly 90% Bitcoin and Ethereum along with smaller allocations to XRP, Solana, and other top altcoins, will now remain in limbo while the Commission deliberates.
The SEC’s action closely follows a similar reversal involving Grayscale’s Digital Large Cap Fund, suggesting a broader unease within the agency regarding multi-asset crypto ETFs. Both halted funds contain assets like XRP, Cardano, and Solana, tokens that have yet to gain standalone ETF approval, raising speculation that the Commission may be reluctant to permit ETFs holding such assets before issuing further guidance.
The repeated use of Rule 431 points to internal divisions within the SEC, as well as a heightened sensitivity to perceived regulatory gaps in the crypto market.
Observers Criticize “Bizarre” Decision
The crypto investment community has not held back. Nate Geraci, co-founder of The ETF Institute, called the situation “bizarre” in a post on X, stating, “Both of these should be allowed to convert/uplist ASAP.” Observers have noted that the SEC’s mixed signals risk undermining investor confidence and stalling momentum for broader crypto ETF adoption. The lack of transparency has prompted criticism that the regulator is prioritizing caution over clarity.
This latest setback suggests that the SEC remains deeply cautious about opening the door too widely to crypto exposure, particularly when it involves tokens not yet afforded individual ETF status. For Bitwise, Grayscale, and other asset managers, the path to approval now appears more complex and politicised than ever, and until the Commission sets a clear policy on multi-asset products, issuers and investors alike will be left navigating uncertainty in a regulatory landscape still struggling to define its approach to crypto.
