SEC Flip-Flops Again on Bitwise Crypto ETF Approval: What Happened?

In a surprising move, the U.S. Securities and Exchange Commission (SEC) approved the conversion of Bitwise’s crypto index fund into an exchange-traded fund (ETF) on Tuesday, then immediately put it on pause.

This back-and-forth has left investors and analysts scratching their heads, especially after the crypto industry had been eagerly awaiting more ETF approvals in the space.

So, what exactly happened, and why did the SEC hit the brakes just moments after granting approval?

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Key Takeaways

1. The SEC approved and then paused the Bitwise 10 Crypto Index Fund ETF on the same day. The situation has created confusion in the crypto and finance communities.

2. Analysts suggest the pause was politically driven or part of SEC internal strategy. The approval was under “delegated authority,” but now awaits further commission review.

3. This mirrors past delays like the Grayscale ETF case. Industry watchers say the SEC might be stalling until broader listing rules are finalized.

The Timeline: What Happened to the Bitwise ETF?

On Tuesday, the SEC’s Division of Trading and Markets granted what’s known as “accelerated approval” to Bitwise Asset Management.

The approval allowed Bitwise to convert its existing Bitwise 10 Crypto Index Fund, which trades under the ticker BITW, into a full ETF.

This would have allowed investors broader access to a diversified crypto investment vehicle without holding the assets directly.

But almost immediately, the situation changed. Later the same day, a letter from SEC Assistant Secretary Sherry Haywood announced that the approval order was “stayed until the Commission orders otherwise.” The reason? A review by the full Commission was needed.

This flip-flop essentially froze the entire process, despite Bitwise receiving initial approval. ETF analysts, including Bloomberg’s James Seyffart, noted the unusual timing, the SEC moved earlier than expected, only to immediately stall the process.

Why the Quick Reversal?

One theory is that the decision to approve was made under “delegated authority,” which allows certain departments to make decisions without a full Commission vote. However, other commissioners can then call for a review, which seems to have happened in this case.

This scenario closely resembles what happened with Grayscale’s Digital Large Cap ETF earlier this month, approved, then paused. It shows a pattern of internal disagreement or strategic delay within the SEC.

Read Also: 21Shares Submits Filing for Two Crypto ETFs with U.S. SEC: Key Details and Impact on Market

Political and Regulatory Tensions Behind the Pause

The crypto community has been quick to interpret the pause as more than just a procedural delay. Some industry experts believe the SEC’s internal politics may be driving the indecision.

Scott Johnsson of Van Buren Capital speculated that the approval may have been pushed through using delegated authority to avoid interference from Commissioner Caroline Crenshaw, who is known to take a cautious stance on crypto.

This could explain the sudden urgency in approving the ETF, followed by a quick pause once it caught internal attention.

Others, like Bloomberg’s Eric Balchunas, suggest the SEC may be stalling until it can publish clearer listing standards for crypto ETFs.

These standards, once released, would create more uniformity in the approval process and could reduce the need for case-by-case decision-making.

Is This Normal?

While it may sound strange, this kind of back-and-forth isn’t new for the SEC. ETF approvals, especially those related to cryptocurrency, have gone through similarly rocky paths before.

The Grayscale Bitcoin ETF and VanEck’s crypto ETF filings have both faced multiple delays and revisions.

At the heart of the matter is the SEC’s cautious approach to crypto exposure in traditional financial markets. They want to be sure that the risks are understood and managed before giving the green light.

Read Also: Is the Solana ETF Decision Delayed Again?

What This Means for Crypto ETFs Going Forward

This latest episode with Bitwise adds to the growing list of delayed or paused crypto ETF efforts. While it’s frustrating for investors hoping for broader access to regulated crypto investments, it does offer insight into the SEC’s current mindset.

The agency appears to be moving toward a more standardized ETF approval process. On July 17, it also delayed decisions on in-kind redemptions for Bitcoin and Ether spot ETFs.

These moves suggest the SEC wants to simplify and streamline how crypto ETFs are handled, potentially automating parts of the process to avoid frequent delays.

When Could We See Progress?

Some experts believe the SEC is holding back until it finalizes new listing rules for digital asset ETFs. Once those are published and public feedback is collected, the path forward could become clearer. That might happen in time for some key October deadlines for other pending ETF applications.

A Pattern of Delay

From Grayscale to Bitwise, the pattern is clear: approve first, pause second, and review internally. While it’s not ideal for applicants or investors, it shows the SEC is still figuring out how to handle crypto’s place in the ETF landscape.

Read Also: Ripple Breaks Free from SEC Drama as XRP Eyes a Bright Future

Conclusion

The SEC’s approval and sudden pause of the Bitwise 10 Crypto Index ETF shows just how unsettled the regulatory landscape still is for crypto in the U.S.

The agency’s actions point to internal disagreements, procedural hurdles, and possibly a broader strategy to hold off until new listing standards are finalized.

For now, crypto investors and fund managers will need to remain patient. If you want to stay active in the crypto market while regulatory bodies iron things out, Bitrue is a user-friendly platform where you can explore hundreds of digital assets, track performance, and manage your investments easily and securely. Bitrue continues to offer reliable tools in a shifting environment.

FAQ

What is the Bitwise 10 Crypto Index Fund?

It’s a fund that provides exposure to the top 10 cryptocurrencies. Bitwise applied to convert it into an ETF for easier market access.

Did the SEC approve the Bitwise ETF?

Yes, it was approved under delegated authority, but the decision was paused the same day for further review.

Why did the SEC pause the ETF after approving it?

The pause was likely triggered by internal disagreements or a request for full Commission review.

Is this the first time the SEC has done this?

No, a similar situation happened with Grayscale’s ETF application earlier this month.

When will the Bitwise ETF be available?

There is no confirmed timeline. It depends on the outcome of the SEC’s ongoing review and future listing rule updates.

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