Simply put
- The ETF for SEC Staff approved Bitwise will occur on Tuesday, but it was immediately suspended due to discretionary review protocols.
- Grayscale’s GDLC encountered a similar situation earlier this month, resulting in a legal warning from their end.
- Nate Geraci, co-founder of the ETF Institute, described the ETF conversion as a “strange situation” amidst ongoing uncertainties.
The SEC has suspended the approval of another Crypto Index ETF, making it the second time this month the committee has acted to halt staff-level recommendations.
This particular action impacts Bitwise’s 10 Crypto Index ETF, which had just received approval from the SEC’s trading and market division a day earlier.
The sudden suspension has stirred concern among crypto ETF observers, particularly those supporting multi-asset funds. It indicates potential internal resistance against broader crypto products.
“These should really be converted or uplisted as soon as they can,” said Nate Geraci on X, referring to the unfolding circumstances as a “strange situation.”
This approval would have enabled NYSE ARCA to list the fund as a “trust unit” under Rule 8.500-E, which pertains to products holding commodities and asset-backed offerings like cryptocurrencies.
However, shortly after the notice was published, the SEC’s Secretary’s Office revealed that the entire committee would reassess the lawsuit under Rule 431, resulting in an automatic stay.
This rule allows the committee to re-evaluate decisions made by staff that fall under their mandated authority.
When invoked, the rule suspends the approval automatically until the committee decides whether to uphold, amend, or reverse it. There’s no required timeline, and the agency isn’t obligated to give public explanations.
This ongoing pattern puts other ETF publishers in a tough spot: they’re getting staff approvals, but those are being delayed indefinitely by the committee.
Earlier this month, a Grayscale Digital Large Cap Fund (GDLC) was also approved by staff to convert to a Spot ETF, yet faced similar suspension just days later under these same rules. The fund includes assets like Bitcoin, Ethereum, and XRP.
A week after that, Grayscale issued a warning to investors, expressing that the delays could potentially “harm” them and hinted at the possibility of legal action.
Meanwhile, Bitwise’s index ETF is designed to track weighted indexes of the ten largest crypto assets, excluding Stablecoins and Lapped Tokens, as per the SEC. The approval order was scheduled for release on Tuesday.
This ETF aims to provide investors with a means to access a broader digital asset market through products available on a single exchange.
Before it was approved and then suspended, Bitwise’s proposal highlighted concerns about market manipulation and the reliability of crypto market pricing, calling on the SEC to reject their filing and noting risks of fraud and inadequate oversight in the underlying crypto market.
Decryption has reached out to the SEC, Bitwise, and Grayscale for their comments.
