The SEC approved Bitwise ETF but paused the launch under Rule 431 while it reconsiders the decision.
The Bitwise fund holds Bitcoin Ethereum and XRP and plans monthly rebalancing to align with the crypto index.
The ETF remains inactive as the SEC also delayed a similar fund by Grayscale for the same reason.
The U.S. Securities and Exchange Commission approved Bitwise’s plan to convert its crypto index fund into an ETF. However, the Commission halted the launch using Rule 431(e), citing the need for further review. The sudden reversal has raised concern among market observers.
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The Bitwise 10 Crypto Index Fund includes top cryptocurrencies by market cap. These include Bitcoin, Ethereum, XRP, Solana, and Polkadot. Bitcoin holds the largest share at 78.72%. Ethereum follows with 11.10%, and XRP stands at 4.97%.
Breakdown of Fund Holdings and Structure
The ETF will follow the Bitwise Crypto Index. It covers a range of crypto assets already approved for exchange-traded products. These make up at least 85% of the portfolio. The remaining 15% includes unapproved assets like XRP and Solana.
Coinbase Custody is responsible for securing the crypto assets. BNY Mellon handles cash management and serves as the fund administrator. The ETF will rebalance monthly to match the index structure.
The fund allows the creation and redemption of large share blocks known as Creation Units. This mechanism mirrors existing ETFs in the crypto space.
Regulatory Pause Creates Uncertainty
Despite initial approval, the SEC’s Trading and Markets Division stayed the order. The decision, signed by Assistant Secretary Sherry R. Haywood, cited Rule 431. This rule gives the Commission power to halt decisions for reevaluation.
The ETF will remain inactive until the SEC finishes its review. The pause delays potential access to broader markets for investors. Currently, the fund trades over the counter with the ticker “BITW.” A national exchange listing would increase its reach among retail and institutional investors.
Similar Action Taken Against Grayscale Fund
This decision follows a similar situation with Grayscale’s Digital Large Cap Fund. The SEC had approved its conversion to an ETF. But the Commission halted that plan the following day. Grayscale’s fund also holds Bitcoin, Ethereum, Solana, ADA, and XRP.
Both funds face delays despite meeting approval standards. Analysts believe internal SEC divisions may be influencing the halts. Concerns about crypto exposure and political dynamics could be factors in the delay.
SEC Reviews Crypto ETFs as Market Waits
The SEC is also reviewing several other crypto ETF proposals. Some track tokens like SOL and DOGE. Recent delays suggest the Commission is treading cautiously. The outcome of these reviews will shape future ETF approvals in the crypto space.
