Regulatory hold-up on Bitwise and Grayscale's cryptocurrency index ETFs incites market uncertainty
SEC Pauses Trading of Crypto Index ETFs by Bitwise and Grayscale
In a surprising turn of events, the Securities and Exchange Commission (SEC) has halted trading for crypto index ETF products by Bitwise and Grayscale, despite initially approving them.
The SEC granted accelerated approval to Bitwise's 10 Crypto Index Fund conversion into an ETF on July 22, 2025. However, an immediate stay order followed, halting trading before it could begin. A similar pattern occurred earlier for Grayscale’s Digital Large Cap Fund.
Nate Geraci of the ETF Institute and James Seyffart, Bloomberg ETF analyst, speculate that this delay could be due to intervention by one or more SEC commissioners after the initial approval, effectively halting the conversion process.
Adam Gana, attorney at law firm Gana Weinstein LLP, echoed Geraci's sentiments, stating that the SEC's approval-pause moves create 'confusion and undermine market confidence.' Scott Johnsson, a policy watcher, faulted the SEC for the pauses, stating they are 'funny' and shouldn't be happening under pro-crypto chair Paul Atkins.
The second reason for the SEC’s pause on crypto ETF approvals could be the strategic delay while it finalizes a comprehensive regulatory framework for crypto-related ETFs. This regulatory hesitation despite public approvals could be causing concerns over regulatory consistency and investor confidence amid shifting priorities in crypto ETF approvals.
21Shares is exploring other faster options to seek approval for its crypto index ETFs due to the SEC holdout. Apart from crypto index ETFs, individual altcoin ETFs have also faced delays, including the Fidelity spot SOL ETF application.
The approved ETF offers exposure to a basket of crypto assets, including Bitcoin [BTC], Ethereum [ETH], Ripple [XRP], and Solana [SOL]. The SEC's projection for the agency's standard crypto ETF approval framework to be active by fall has been questioned by Johnsson and Eric Balchunas, who stated that the delays could not go beyond October.
Geraci projected that the agency's standard crypto ETF approval framework could be active by fall, but the delays could potentially extend beyond that. The SEC's stay order is similar to the one that prevented Grayscale Digital Large Cap Fund from trading after its approval earlier in the month.
In summary, the delays in trading crypto index ETFs seem less about specific deficiencies in the approvals themselves and more about broader regulatory caution and internal review within the SEC amidst evolving crypto market oversight. The SEC's actions have created confusion and undermined market confidence, and it remains to be seen whether all the altcoin and index ETFs will be greenlighted by October.
- The SEC's decision to pause trading for crypto index ETFs by Bitwise and Grayscale, despite initial approvals, has raised questions about regulatory consistency and investor confidence.
- As a result of the SEC's holdout, 21Shares is considering faster approval methods for its crypto index ETFs, and individual altcoin ETFs, such as the Fidelity spot SOL ETF application, have also faced delays.
- The approved ETF offers exposure to a basket of crypto assets, including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Solana (SOL).
- Scott Johnsson, a policy watcher, and Eric Balchunas question the SEC's projected standard crypto ETF approval framework to be active by fall, suggesting that delays could potentially extend beyond October.
- Experts, including Nate Geraci of the ETF Institute and James Seyffart, Bloomberg ETF analyst, speculate that the delays could be due to internal review and regulatory hesitation within the SEC while finalizing a comprehensive regulatory framework for crypto-related ETFs.
