SEC Halts Approval of Bitwise Crypto Index Fund ETF Conversion
The U.S. Securities and Exchange Commission (SEC) approved Bitwise’s application to convert its crypto index fund into an exchange-traded fund but immediately paused the conversion, leaving the fund’s sponsor in limbo pending a review.
On Tuesday, the SEC’s Division of Trading and Markets granted an “accelerated approval” for the conversion of the Bitwise 10 Crypto Index (ticker: BITW) into an ETF, potentially allowing the sponsor to expedite the registration process. However, SEC Assistant Secretary Sherry Haywood subsequently sent a letter staying the order until the Commission orders otherwise and reviewing the delegated action.
Situation Mirrors Grayscale ETF Delay
The approval followed a request from Bitwise’s founder, Adam Whiteley, to Treepoint Fund Manager (formerly the sponsor of BITW) to seek accelerated approval under the agency’s delegated authority program. However, the SEC stayed the order.
“This wasn’t due for a decision until next week. So the SEC went pretty early with this decision,” Bloomberg ETF analyst James Seyffart cited a source suggesting multiple commissioners may have involved in the stay.
“This wasn’t due for a decision until next week. So the SEC went pretty early with this decision.”
No official comment from the SEC or Bitwise was available for immediate response.
NovaDius Wealth Management President Nate Geraci described the situation as “bizarre,” drawing parallels to the July 1st delay of the Grayscale Digital Large Cap ETF conversion, which was also approved before being paused.
Bloomberg ETF analyst Eric Balchunas suggested the SEC may be stalling to establish generic listing standards for crypto ETFs before granting final authorization, enabling faster reviews in the future.
SEC Actions Spark Speculation
Scott Johnson, General Partner at Van Buren Capital, characterized the approval and subsequent pause as suspicious, speculating it might be an attempt by SEC Chair Paul Atkins to circumvent the 240-day statutory approval period.
“Both explanations are the kind of funny business that shouldn’t really be happening under Atkins.”
Further complicating the situation, the SEC extended its deadline for ruling on in-kind redemptions for Bitwise’s existing Bitcoin and Ether spot ETFs.
Industry observers suggest regulators may be streamlining the ETF approval process for select crypto investment vehicles to meet upcoming October application deadlines.
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