In a surprising turn of events, the U.S. regulatory body for financial markets, the Securities and Exchange Commission (SEC), initially gave the nod to Bitwise’s application to transform its cryptocurrency index fund, BITW, into a spot exchange-traded fund (ETF) on July 7, 2025. However, this decision was quickly retracted just hours later, with the SEC stating it needed more time for a thorough examination.
The proposed fund’s holdings primarily consisted of 90% Bitcoin (BTC) and Ethereum (ETH), with the remaining portion allocated to alternative cryptocurrencies, often called altcoins, such as Solana (SOL), XRP, and Cardano (ADA). This marks the second instance this month where a multi-asset cryptocurrency ETF faced a regulatory hold, mirroring a similar situation with Grayscale’s GDLC fund [1]. The SEC invoked Rule 431(e), which allows the agency to re-evaluate decisions made under delegated authority, as the justification for this sudden pause [2].
The BITW fund, which has been active since 2017, currently manages $1.68 billion in assets. It follows a monthly rebalancing schedule and charges a relatively high expense ratio of 2.5%. Had the conversion to a spot ETF been successful, it would have been the first multi-asset crypto index ETF in the United States [3]. Nevertheless, the SEC’s communication to Bitwise mirrored the language used when pausing Grayscale’s application, suggesting a consistent approach to regulatory caution. Sources indicate that the SEC’s reluctance stems from unanswered questions regarding how altcoins like XRP and ADA are treated, especially considering the absence of standalone ETFs for these assets and ongoing concerns about their compliance with securities regulations [4].
This reversal has amplified speculation surrounding the SEC’s standards for approving cryptocurrency ETFs. While the regulatory agency has signaled openness toward investment products focused on Bitcoin and Ethereum, its stance on multi-asset funds appears less clear. Notably, the SEC continues to process amendments related to redemption procedures for Bitcoin and Ethereum ETFs proposed by entities like Franklin Templeton, Fidelity, and Invesco Galaxy, while simultaneously delaying decisions on funds incorporating altcoins [5]. This discrepancy highlights the difficulties the SEC faces in balancing innovation and the need to protect investors in this rapidly evolving digital asset market.
The BITW situation also highlights the intricate political and legal landscape surrounding cryptocurrency regulation. Industry observers believe the SEC’s actions reflect broader debates regarding its jurisdiction over digital assets, particularly as alternative regulatory frameworks gain momentum in Congress. This delay could restrict market access for investors seeking diversified exposure to cryptocurrencies, although Bitwise has not yet announced whether its 2.5% management fee will remain unchanged post-conversion [6].
The consequences of this decision go beyond Bitwise. The 6% drop in XRP’s price immediately after the announcement illustrates how sensitive the cryptocurrency market is to regulatory signals, as investors closely analyze each decision for hints about future policy [7]. Simultaneously, the SEC’s recent reviews of the Canary Capital SUI ETF and 21Shares’ proposal for a token-linked to ONDO suggest the regulatory agency is expediting its assessment of emerging cryptocurrency asset classes [8].
Critics argue that the SEC’s inconsistent use of Rule 431(e) could stifle innovation, while proponents defend the reviews as essential safeguards against market instability and potential fraudulent activities. With more than 20 ETF applications currently under consideration by the SEC, the BITW case could serve as a precedent for how multi-asset cryptocurrency products navigate the complexities of regulatory compliance.
Sources:
[1] [title1: SEC approves, then instantly pauses Bitwise’s ETF conversion] [url1: https://cointelegraph.com/news/sec-pauses-bitwise-crypto-etf-after-approval]
[2] [title2: SEC Hits Pause After Approving Bitwise Crypto ETF Conversion] [url2: https://unchainedcrypto.com/sec-hits-pause-after-approving-bitwise-crypto-etf-conversion/]
[3] [title3: SEC Approves Then Pauses Bitwise’s Bid to Convert BITW] [url3: https://www.coindesk.com/policy/2025/07/22/sec-approves-then-pauses-bitwise-s-bid-to-convert-bitw-crypto-index-fund-to-etf]
[4] [title4: SEC Halts Bitwise Crypto ETF Approval Over XRP ADA] [url4: https://www.ainvest.com/news/xrp-news-today-sec-halts-bitwise-crypto-etf-approval-xrp-ada-inclusion-spurring-regulatory-debate-2507/]
[5] [title5: SEC Approves Bitwise ETF, Then Freezes It for Review] [url5: https://www.ccn.com/news/crypto/sec-approves-bitwise-etf-then-freezes-it/]
[6] [title6: SEC Approves, Immediately Pauses Bitwise’s Bid to Convert BITW] [url6: https://finance.yahoo.com/news/sec-approves-immediately-pauses-bitwises-215055666.html]
[7] [title7: XRP drops 6% as SEC delays Bitwise crypto ETF] [url7: https://m.economictimes.com/news/international/us/xrp-sinks-6-percent-again-as-sec-delays-bitwise-crypto-etf-is-the-dip-a-red-flag-or-a-golden-buy-signal-heres-the-2025-xrp-price-prediction-you-need-to-see/articleshow/122859722.cms]
[8] [title8: Bitwise ETF Gets Green Light, Then Halted by SEC Review] [url8: https://www.bitdegree.org/crypto/news/bitwise-etf-gets-green-light-then-halted-by-sec-review]