SEC delays on Bitwise, Grayscale crypto index ETFs spark market confusion

Key Takeaways 

SEC pause and delays on crypto index ETFs by Bitwise and Grayscale spark confusion. Policy watchers decried that the stalling shouldn’t happen under Atkins’ watch. 

The Securities and Exchange Commission (SEC) has hit headlines after it paused crypto index ETF products by Bitwise and Grayscale from trading despite approving them. 

On the 22nd of July, the agency greenlighted the conversion of Bitwise’s multi-crypto fund, Bitwise 10 Crypto Index Fund (BITW), into an ETF (exchange-traded fund). 

The ETF would offer an exposure to a basket of crypto assets, including Bitcoin [BTC], Ethereum [ETH], Ripple [XRP], and Solana [SOL], amongst others. 

SEC noted that the approval was on an ‘accelerated basis’ but a stay order followed immediately, preventing it from live trading. 

Decoding SEC’s mixed signals

The agency’s stay order was similar to the one that prevented Grayscale Digital Large Cap Fund from trading after approval earlier in the month. 

Speaking on the same, Bloomberg ETF analyst, James Seyffart, speculated that the delay could be due to two reasons. First, a likely order from one or multiple commissioners and added, 

“Bitwise has been stayed by either one or multiple commissioners. Meaning they cannot actually convert it into an ETF … *yet*”

The second reason could be to bid time to finalize the framework for crypto ETF approval. In fact, the latter was widely floated when Grayscale’s multi-crypto index fund conversion was paused. 

Other policy watchers like Scott Johnsson also subscribed to this argument. However, Johnsson faulted the agency, adding that the pauses were ‘funny’ and shouldn’t be happening under pro-crypto chair Paul Atkins. 

“I have to wonder what is going on at the SEC…Both explanations are the kind of funny business that shouldn’t really be happening under Atkins.”

Source: Scott Johnsson/X

But Nate Geraci of the ETF Institute speculated that the stalling could be from some of the commissioners at the agency.

Like Adam Gana, attorney at law firm Gana Weinstein LLP, Geraci echoed that the SEC’s approval-pause moves create ‘confusion and undermine market confidence.’

That said, apart from crypto index ETFs, individual altcoin ETFs have also faced delays. Notably, the decision on the Fidelity spot SOL ETF application was pushed. 

Still, Geraci projected that the agency’s standard crypto ETF approval framework could be active by fall. But Johnsson and another Bloomberg ETF analyst, Eric Balchunas, stated that the delays could not go beyond October. 

The SEC holdout has prompted 21Shares to explore other faster options to seek approval for its crypto index ETFs. It remains to be seen whether all the altcoin and index ETFs will be greenlighted by October.