SEC Approves, Immediately Pauses Bitwise’s Bid to Convert BITW Crypto Index Fund to ETF

The Securities and Exchange Commission (SEC) initially approved, then unexpectedly halted, Bitwise Asset Management’s proposal to transform its Bitwise 10 Crypto Index Fund (BITW) into a spot exchange-traded fund (ETF). This decision underscores the SEC’s evolving and currently unclear standards for crypto ETFs.

BITW, launched in 2017, currently holds $1.68 billion in assets. Its portfolio is heavily weighted toward Bitcoin (BTC) and Ether (ETH), comprising 90% of its holdings. The remaining 10% is diversified across Solana (SOL), XRP, Cardano (ADA), Avalanche (AVAX), Chainlink (LINK), Bitcoin Cash (BCH), Uniswap (UNI), and Polkadot (DOT). The fund rebalances monthly, incurring a 2.5% expense ratio—relatively high for ETFs. Conversion to a spot ETF would establish BITW as the first multi-asset crypto index ETF in the U.S., provided the SEC ultimately approves the conversion. Whether the 2.5% management fee will persist remains undisclosed.

This isn’t an isolated incident. Grayscale’s Digital Large Cap Fund (GDLC), tracking BTC, ETH, XRP, SOL, and ADA, also faced a similar fate, with the SEC pausing its launch after initial approval. In both cases, the SEC’s communication was identical: “the Commission will review the delegated action.”

Sources suggest the SEC’s hesitation stems from the need to establish consistent regulatory frameworks for crypto ETFs, particularly concerning tokens like XRP and ADA, which lack standalone ETF approvals. The SEC’s recent activities highlight this ongoing process. On the same day as the Bitwise decision, the regulator processed filings from several firms, including Franklin Templeton, Fidelity, and Invesco Galaxy, seeking adjustments to the redemption mechanisms for their Bitcoin and/or Ethereum ETFs. Furthermore, the SEC initiated a review of the Canary Capital SUI ETF and extended the deadline for 21Shares’ SUI ETF application. Adding to the complexity, 21Shares also submitted a proposal for an ETF tracking ONDO, the token associated with the Ondo Finance platform. The SEC’s actions reflect a period of intense activity and careful consideration within the burgeoning cryptocurrency ETF market.