Crypto ETF Freeze: SEC’s Latest Bureaucratic Comedy

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In a scene straight from a Chekhovian drama, the U.S. Securities and Exchange Commission (SEC) recently granted its blessing to the Bitwise 10 Crypto Index Fund conversion—only to reverse course mere hours later. As if fate had conspired against our crypto protagonists, the Commission paused the decision for a full review. One might say the SEC’s corridors echo with the laughter of bureaucracy. 🙃

Bitwise’s ETF approval was halted just hours after clearance, thrusting its multi-asset crypto fund into a Kafkaesque limbo. Grayscale’s GDLC, having endured a similar fate earlier, warned that such delays might wound investors. The BITW index fund—a market-cap-weighted basket of ten leading crypto assets led by Bitcoin and Ethereum—now sits at the mercy of regulatory indecision.

On July 22, the SEC’s Division of Trading and Markets, in a burst of efficiency, granted accelerated approval for Bitwise’s proposal to convert its over-the-counter crypto index fund into a spot exchange-traded fund. The move, a milestone for multi-asset crypto ETFs in the U.S., would have permitted listing on NYSE Arca under the amended Rule 8.500‑E (governing Trust Units). Yet, as the sun set that same day, the SEC’s Office of the Secretary issued a notice that the Commission would review the delegated action. Under Rule 431, this review automatically suspends the approval—a twist as predictable as it is infuriating. 🕺

What is the Bitwise 10 Crypto Index ETF?

Launched in 2017 and trading under BITW, the Bitwise 10 Crypto Index Fund is designed to track the ten largest crypto assets—deliberately excluding stablecoins and wrapped tokens. Each month, like clockwork, it rebalances its portfolio. As of June 2025, nearly 90% of its assets were held in Bitcoin and Ethereum, with the remaining funds allocated to XRP, Solana, Cardano, Chainlink, Avalanche, Litecoin, and Polkadot. Bitwise’s goal was to transform BITW from an over-the-counter product into a regulated ETF, thereby widening investor access and potentially lowering fees. Yet, as with many noble quests, the path to regulatory acceptance is strewn with red tape. 🙄

The SEC’s order confirmed that the fund met key conditions—such as holding at least 85% of its assets in digital commodities already featured in approved ETFs like Bitcoin and Ethereum. But even the best-laid plans of crypto funds (or mice, for that matter) can be undone by the capricious whims of regulators.

Why did the SEC issue the stay order?

This bureaucratic pause is not without precedent. On July 1, the Commission’s Division of Trading and Markets had approved Grayscale’s request to convert its Digital Large Cap Fund (GDLC) into an ETF. Yet, as if echoing a recurring theme in a Chekhov play, just one day later the Commission stayed that decision using the same Rule 431 process. Both BITW and GDLC share a mix of Bitcoin, Ethereum, XRP, Solana, and Cardano. The repeated invocation of Rule 431 has stirred frustration among issuers, with Grayscale warning that such delays are harming investors. One might wonder if the SEC is engaged in a deliberate game of regulatory brinkmanship. 😒

Bitwise has yet to comment on this latest development. Meanwhile, experts like Van Buren Capital’s Scott Johnsson speculate that the SEC may have orchestrated these reversals in advance—perhaps anticipating opposition from Commissioner Caroline Crenshaw, a vocal crypto skeptic. Such maneuvers leave many pondering whether the delay is a mere pause or a calculated act in a larger bureaucratic theatre. 🤔

This is another crypto index ETP, and it’s been stayed under Rule 431 (just like Grayscale’s Digital Large Cap) to review the delegated authority order. I have to wonder what is going on at the SEC. I can excuse GDLC as an unforeseen Crenshaw twist, but this…

— Scott Johnsson (@SGJohnsson) July 22, 2025

On the flip side, Bloomberg Intelligence analyst James Seyffart speculated that the agency might be stalling as it finalizes a unified framework for crypto ETFs. “Perhaps the SEC is merely delaying these ETFs until it can establish a generic listing standard for digital assets,” Seyffart mused in an X post responding to Johnsson. Meanwhile, Nate Geraci, co-founder of The ETF Institute, has decried the development as a “bizarre situation” and has urged the regulator to swiftly “convert/uplist” the fund—a plea echoing in the halls of financial bureaucracy. 🕒

SEC Delayed Bitwise’s Ethereum Staking ETFs

The Commission is currently reviewing a host of ETFs tracking various cryptocurrencies. Yet, it has shown particular hesitation toward proposals involving more complex mechanisms—especially those incorporating staking. On June 30, the SEC delayed its decision on Bitwise’s proposal to allow Ethereum staking within a spot ETF structure, opting instead to open the application for public comment. The question at hand: Do staking rewards introduce risks that traditional ETFs aren’t equipped to handle? Such deliberations leave investors wondering if the SEC is a cautious guardian or a meddling bureaucrat. 🙃

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2025-07-23 09:36