Bitwise was so close to creating history. On July 22, the SEC’s Division of Trading and Markets approved the conversion of the Bitwise 10 Crypto Index Fund (ticker: BITW) into a full-fledged spot ETF (Bitwise ETF). For a brief moment, cryptocurrency Twitter went crazy. But only hours later, the SEC hit the brakes.
Using Rule 431, the SEC delayed the move awaiting a thorough examination by its higher-ups. That’s correct, the staff authorized it, and then the Commission intervened to say, “Hold up, we’re not done here.”
Consider BITW to be the cryptocurrency equivalent of the S&P 500. It is a market-weighted index fund including the top ten digital assets. Bitcoin and Ethereum account for over 90%, with the remainder made up of strong hitters such as Solana, XRP, Avalanche, Cardano, Chainlink, Polkadot, Uniswap, and Bitcoin Cash.
It has been trading over-the-counter since 2020, but obtaining Bitwise ETF certification would have opened the door for institutional money and retiree investors who do not want to deal with hot wallets or seed ideas.
If this sounds similar, it’s because Grayscale just went through the same experience with its Digital Large Cap Fund (GDLC). Staff approved the money, which was then suspended within 24 hours.
Bloomberg ETF analyst James Seyffart said on X, “The SEC’s new hobby is approving ETFs… then immediately hitting them with Rule 431.”
And he is not incorrect. The regulation empowers the whole Commission to examine decisions made by staff. Is there a catch? Because there is no clear timetable, Bitwise ETF might be in limbo for weeks, if not months.
Industry insiders aren’t thrilled. “It’s a bizarre, bureaucratic dance,” says Nate Geraci, president of the ETF Store. “We’re now in a spot where approval means nothing until the full Commission says so.”
Others believe the SEC is trying to create a unified regulation before allowing altcoin-heavy ETFs to flood the market. Some argue that it is a political action motivated by internal opposition at the agency, notably from Commissioner Caroline Crenshaw, a noted crypto skeptic.
What’s the immediate impact? Confusion. Markets did not plummet, but you could sense the strain. Altcoins like as XRP, SOL, and ADA — all part of BITW’s portfolio, saw volatile price activity as traders attempted to make sense of the SEC’s double-take.
For Bitwise, this is a waiting game. The corporation has yet to reply formally after the freeze, but history is on their side. They were the first to register for a cryptocurrency index fund in 2017. If anyone is playing the long game, it is they.
So here it is: another day, another SEC rug pull. While the original clearance raised hopes for multi-asset crypto Bitwise ETF, the freeze serves as a reminder that US crypto regulation remains a Wild West show, with plot changes around every turn.
The focus is now on the SEC’s next action. Will they eventually establish rules for crypto basket ETFs, or will they continue to play ETF red light/green light? Time will tell. But one thing is for certain: the stakes are bigger than ever.
Also read Bitwise ETH ETF.
Q1: Why did the SEC pause the Bitwise ETF after approving it?
A: The full Commission decided to review the decision using Rule 431, which overrides staff approvals.
Q2: What cryptocurrencies are in the BITW fund?
A: Mainly Bitcoin and Ethereum, plus Solana, XRP, Cardano, Avalanche, and a few others.
Q3: What does this mean for future crypto ETFs?
A: It shows the SEC isn’t ready to commit to altcoin-heavy ETFs just yet, pending clearer regulations.
ETF (Exchange-Traded Fund): A fund that trades on stock exchanges like a stock, often tracking an index or basket of assets.
Rule 431: An SEC rule allowing the Commission to review decisions made by its staff before they take effect.
Altcoins: Cryptocurrencies other than Bitcoin, includes Ethereum, Solana, XRP, and others.
Spot ETF: A fund that holds the actual assets (like BTC or ETH) rather than derivatives or futures contracts.
Index Fund: A type of investment fund that replicates a specific index — in this case, a top-10 crypto index.
