Bitwise ETF Approval Cancelled Hours After Announcement: Is the SEC Playing Hardball?

Bitwise ETF Approval Abruptly Paused By SEC Amid Internal Scrutiny

The U.S. Securities and Exchange Commission approved Bitwise’s plan to convert its 10 Crypto Index Fund (BITW) into a spot ETF—then unexpectedly froze the decision just hours later, throwing the process into uncertainty.

The Division of Trading and Markets had granted accelerated approval for the conversion on 22 July.

But on the same day, a letter from SEC assistant secretary Sherry Haywood announced the order was “stayed until the Commission orders otherwise,” and that the full Commission would now review the delegated approval.

First Multi-Asset Crypto ETF In Limbo

Bitwise’s fund holds over $1.6 billion in assets, with 90% allocated to Bitcoin and Ether.

The remaining 10% is split across altcoins including Solana, XRP, Cardano, Avalanche, Chainlink, Bitcoin Cash, Uniswap, and Polkadot.

Bitwise has operated the fund since 2017 under the ticker BITW.

The conversion would have made it the first multi-asset spot crypto index ETF to launch in the U.S.

The firm has not disclosed whether the current 2.5% expense ratio would change post-conversion.

Mirrors SEC's Grayscale Reversal

The SEC’s handling of Bitwise echoes its recent treatment of Grayscale’s Digital Large Cap Fund (GDLC), which also received an initial green light to convert into an ETF before the approval was paused.

Both funds are currently traded over the counter and primarily offer exposure to BTC and ETH, with minor allocations to assets like XRP, SOL and ADA.

Bloomberg ETF analyst James Seyffart commented that the Bitwise order had been “stayed by either one or multiple commissioners,” effectively freezing the conversion.

He wrote on X,

“Should add -- this wasn’t due for a decision until next week. So the SEC went pretty early with this decision.”

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Political Tensions And Speculation Over Delays

Industry voices have raised concerns about the opaque process.

Scott Johnsson, general partner at Van Buren Capital, suggested on X that the order may have been pushed through under delegated authority to prevent interference by Democratic Commissioner Caroline Crenshaw, who is known for her critical stance on crypto.

Alternatively, he speculated the SEC might be using this tactic to avoid triggering the 240-day statutory review period tied to ETF approvals.

Johnsson stated,

“Both explanations are the kind of funny business that shouldn’t really be happening under [SEC Chair Paul] Atkins.”

SEC May Be Holding Back Until New Standards Are Ready

Several analysts believe the regulator is stalling while it finalises a universal framework for crypto ETF listings.

Bloomberg’s Eric Balchunas noted,

“I think they want to put out their generic listing standards first… Get comments. Implement in time [for] October due dates.”

Currently, exchanges must file individual 19b-4 forms to list crypto ETFs—a lengthy process.

Sources say the SEC is now working with fund managers and stock exchanges on a system to automate and simplify approvals for select products, especially those focused on spot assets.

Altcoin Access Remains Limited

While futures and leveraged ETFs for altcoins like XRP and Solana are available, there are still no approved spot-based ETFs in the U.S. for many of these assets.

The pause on Bitwise’s conversion further delays direct institutional exposure to these tokens.

The regulatory bottleneck also continues despite what some see as a more pro-crypto shift under President Donald Trump’s administration.

On 17 July, the SEC delayed decisions on in-kind redemption mechanisms for both Bitwise’s spot Bitcoin and Ether ETFs.

Meanwhile, new ETF proposals continue to flood in.

The regulator is reviewing filings from major players including Fidelity, Franklin Templeton, and Invesco Galaxy, and examining newer offerings like 21Shares’ proposals tied to SUI and ONDO tokens.