SEC approves but quickly halts Bitwise’s ETF conversion

Bitwise’s Crypto Index Fund Conversion Approved but Paused for Review

The Securities and Exchange Commission (SEC) has given a green light for Bitwise’s Crypto Index Fund to transition into an Exchange-Traded Fund (ETF). However, the approval is now suspended as the SEC reviews the situation.

On Tuesday, the SEC’s trading and market section provided “accelerated approval” for this conversion. This means that Bitwise can ask the SEC to validate registrations faster than the standard timeline, which is a notable development.

But, on the same day, Deputy Director Shelley Haywood mentioned in a letter that, “The order will otherwise remain until the committee orders,” implying further scrutiny lies ahead.

Bitwise’s Crypto Index Fund, known as the Bitwise 10 Crypto Index Fund, trades under the ticker symbol Bitw. It currently offers exposure to various cryptocurrencies, including Bitcoin (BTC) and Ether (ETH). Bitwise filed its application for conversion last November.

The SEC and Bitwise did not immediately respond to inquiries regarding this matter.

Reflecting on Grayscale ETF Delays

In comments on social media, Bloomberg ETF Analyst James Safert pointed out that Bitwise’s ETFs have been “stayed by one or more commissioners,” preventing their actual conversion to ETFs. He noted, “This wasn’t scheduled to be decided until next week, so the SEC has made this decision quite early.”

Nate Geraci, president of Novadius Wealth Management, described the situation as “strange,” suggesting parallels to the Grayscale Digital Large Cap ETF, which saw its conversion also delayed shortly after initial approval.

“In my opinion—both of these should be converted or uplisted as soon as possible,” stated Eric Balkunas.

Speculations on SEC’s Decisions

Scott Johnson, a general partner at Van Buren Capital, speculated on social media that the SEC’s actions might stem from concerns about one of its Democratic commissioners, Caroline Crenshaw, potentially disrupting the approval process. Alternatively, he suggested that SEC chair Paul Atkins may be attempting to circumvent the 240-day timeframe for final approvals.

Balkunas believes that the SEC may be stalling until it establishes clear listing standards for Crypto ETFs.

“They want to introduce generic listing standards first, which should be coming soon. They’ll take feedback and hopefully implement it before the October deadline. That’s just my theory,” he noted.

Additional ETF Delays and Simplification Efforts

Moreover, the SEC has also extended the deadline for Bitwise’s Bitcoin and Ether Spot ETF redemption in kind as of July 17.

Recently, reporter Eleanor Terrett indicated that both the stock exchange and fund managers, along with the SEC, are looking for ways to simplify the ETF approval process for certain cryptocurrency investment vehicles.