SEC Sends Mixed Signals on Crypto ETFs, Stalling Bitwise Conversion
The SEC halted Bitwise's crypto ETF conversion, echoing a recent Grayscale delay, amid internal politics and pending regulations.
In a striking turn of regulatory events, the U.S. Securities and Exchange Commission (SEC) has temporarily blocked Bitwise Asset Management’s attempt to convert its flagship cryptocurrency index fund into a fully operational exchange-traded fund (ETF). The decision came just hours after initial approval was granted under the agency's delegated authority, raising concerns over the SEC's consistency and intent in handling crypto-based financial instruments.
On July 22, Bitwise received what appeared to be a green light when the SEC's Division of Trading and Markets approved an "accelerated" conversion of its 10 Crypto Index Fund into an ETF. However, that momentum was quickly reversed. Assistant Secretary Sherry R. Haywood intervened later that same day, invoking Rule 431 to suspend the approval pending a full Commission review.
This maneuver effectively places Bitwise’s ETF ambitions in a state of regulatory purgatory—neither rejected nor allowed to proceed.
The move follows a nearly identical episode involving Grayscale’s Digital Large Cap Fund earlier this month, which was also stayed shortly after receiving approval. Observers see a troubling pattern. Both funds are designed to provide diversified exposure to leading cryptocurrencies such as Bitcoin, Ethereum, Solana, and XRP, offering institutional and retail investors a regulated entry point into the digital asset market.
Industry experts believe the pause may stem from internal SEC politics. Scott Johnsson of Van Buren Capital speculated that the initial approval was potentially a calculated step, anticipating a challenge from crypto-skeptic Commissioner Caroline Crenshaw. He noted the recurring use of Rule 431 as indicative of deeper discord within the Commission.
Other analysts suggest the delays may be strategic. Under SEC Chair Paul Atkins, the agency might be seeking to reset the statutory 240-day window for ETF approvals or waiting to finalize universal listing standards for crypto ETFs. Bloomberg Intelligence’s James Seyffart suggested that broader regulatory guidelines may soon be introduced, potentially streamlining approvals for a wave of pending applications.
The broader context is a shifting political and regulatory landscape. Since President Donald Trump's return to office in January 2025, crypto markets have witnessed a more permissive regulatory tone. ETF proposals for a range of digital assets—including Solana, Dogecoin, and Shiba Inu—are under active review, signaling growing institutional interest.
Yet, the SEC’s recent about-face on Bitwise suggests that internal divisions and unresolved policy frameworks continue to cloud the path forward for crypto ETFs. Until those uncertainties are resolved, the future of digital asset funds remains suspended in a regulatory holding pattern.
