SEC Approves, Then Halts Bitwise Crypto ETF Conversion
Regulatory uncertainty flares as Bitwise's multi-asset crypto ETF faces a sudden pause after initial approval, echoing Grayscale's experience and raising questions about standards for crypto ETFs containing tokens like XRP and ADA.
SEC's Unexpected U-Turn on Bitwise Crypto ETF
The Securities and Exchange Commission (SEC) created ripples in the crypto market by initially approving Bitwise's proposal to convert its Bitwise 10 Crypto Index Fund (BITW) into a spot exchange-traded fund (ETF), only to abruptly pause the launch shortly after. This move injects fresh uncertainty into the regulatory landscape surrounding crypto ETFs.
BITW holds a diverse portfolio with roughly 90% of its assets allocated to Bitcoin (BTC) and Ethereum (ETH). The remaining portion is distributed across other prominent cryptocurrencies, including Solana (SOL), XRP, Cardano (ADA), Avalanche (AVAX), Chainlink (LINK), Bitcoin Cash (BCH), Uniswap (UNI), and Polkadot (DOT).
The fund currently manages $1.68 billion in assets and undergoes monthly rebalancing. While the 2.5% expense ratio is considered relatively high for ETFs, the conversion to a spot ETF would have marked a significant milestone, making BITW the first multi-asset crypto index ETF in the U.S.
Déjà Vu?
A similar situation unfolded with Grayscale’s Digital Large Cap Fund (GDLC), which tracks BTC, ETH, XRP, SOL, and ADA. It too, received initial SEC approval before facing a reversal and launch postponement.
The SEC's official explanation for the Bitwise pause mirrored the one given to Grayscale: "the Commission will review the delegated action."
Industry sources suggest that the SEC's hesitation stems from the need to establish consistent standards for crypto ETFs, especially those including tokens like XRP and ADA, which currently lack dedicated, standalone ETFs.
Broader Regulatory Activity
The SEC's ETF docket remains crowded. Recent filings from Franklin Templeton, Fidelity, and Invesco Galaxy show efforts to amend redemption mechanics for their Bitcoin and/or Ethereum ETFs. The regulator has also initiated a review of the Canary Capital SUI ETF and extended the deadline for 21Shares’ SUI ETF application. 21Shares also filed a proposal for an ETF tracking ONDO.
Key Takeaways
- The SEC approved, then paused, Bitwise's crypto ETF conversion.
- This action mirrors a similar event with Grayscale's GDLC.
- The SEC cited a need for consistent standards, particularly for ETFs including XRP and ADA.
- The SEC is actively reviewing and processing numerous ETF applications.
Investment Considerations
As always, investors should consider their risk tolerance and investment timeline before making allocation decisions. Bitcoin remains a volatile asset despite increasing institutional adoption.
This article is for informational purposes only and should not be considered investment advice. Always consult with a qualified financial advisor.
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