SEC Approves and Pauses Bitwise Crypto ETF Conversion on the Same Day

• The SEC approved and immediately paused Bitwise’s crypto index fund conversion into an ETF.

• The approval was granted under delegated authority but is now under full Commission review.

• The move mirrors past ETF delays and may relate to upcoming listing standards for crypto ETFs.

The U.S. Securities and Exchange Commission (SEC) has approved and simultaneously halted the conversion of the Bitwise 10 Crypto Index Fund (BITW) into an exchange-traded fund (ETF), pending further review. This unusual move has left Bitwise’s ETF aspirations temporarily suspended.

Accelerated Approval Followed by Sudden Stay

On Tuesday, the SEC’s Division of Trading and Markets granted an “accelerated approval” to Bitwise, allowing the firm to convert its index fund into an ETF ahead of the standard review timeline. However, the same day, SEC assistant secretary Sherry Haywood issued a stay order, stating that the decision will remain on hold until the full Commission issues further instructions.

The fund, which holds a diversified basket of cryptocurrencies including Bitcoin (BTC) and Ether (ETH), has traded under the ticker BITW since its initial launch. Bitwise submitted its application to convert the fund into an ETF in November 2023.

The SEC’s sudden reversal mirrors an earlier situation involving Grayscale’s Digital Large Cap ETF. That fund was also approved under delegated authority, only to be paused shortly after. Bloomberg ETF analyst James Seyffart confirmed that the Bitwise ETF approval was likely to be stayed by one or more commissioners, preventing the ETF conversion from moving forward.

Observers note that the decision arrived earlier than expected. The SEC was not required to rule until the following week. This has prompted questions from market analysts and investment executives.

NovaDius Wealth Management president Nate Geraci described the situation as comparable to the Grayscale delay. Meanwhile, Van Buren Capital’s Scott Johnsson speculated that internal political dynamics or procedural maneuvers may influence the SEC’s actions.

ETF Framework and Simplification in Focus

According to Bloomberg’s Eric Balchunas, the SEC may hold back ETF conversions while finalizing a standardized listing framework for crypto ETFs. These listing standards are expected to go through a public comment phase before implementation, possibly aligning with key ETF deadlines in October.

Additionally, on July 17, the SEC extended its review period for Bitwise’s proposed in-kind redemptions on its Bitcoin and Ether spot ETFs. This follows earlier discussions suggesting the agency may simplify crypto ETF approvals by streamlining the process and reducing reliance on 19b-4 filings.

As Bitwise awaits clarity, market participants continue to monitor developments closely. The pause reflects broader uncertainty as the SEC navigates evolving regulatory pathways for cryptocurrency investment products.