SEC Delays Crypto ETFs Despite Initial Approvals
By: Eliza Bennet
The crypto industry continues to navigate regulatory complexity as the US Securities and Exchange Commission (SEC) recently issued a stay order on Bitwise’s attempt to convert its over-the-counter crypto fund into a spot exchange-traded fund (ETF). Bitwise’s application appeared to have passed an initial hurdle when the SEC's Division of Trading and Markets approved it on July 22. However, the SEC's Office of the Secretary soon announced a temporary suspension pending further review, potentially indicating a broader hesitation from the agency in aligning with ETFs involving digital assets.
Bitwise, which manages a sizable $1.68 billion in assets, has been attempting to elevate its 10 Crypto Index Fund (BITW) to trade on platforms like NYSE Arca, promoting a framework closely monitored under Rule 8.500-E, which influences the listing of Trust Units. This fund is heavily weighted in Bitcoin and Ethereum but also includes altcoins like Solana and Cardano. Notably, the SEC's pattern of delaying such conversions has been consistent, resonating with a similar incident involving Grayscale's Digital Large Cap Fund, which had gained approval only to be paused shortly after.
These delays suggest the SEC may be stalling to establish a concrete regulatory framework specific to digital asset ETFs. Bloomberg ETF analyst James Seyffart noted that these actions might serve as interim measures before finalizing a listing standard. This potential framework could reshape how ETFs are structured, requiring issuers to adhere to criteria like registering under Form S-1 and undergoing a systematic review before listing. This effort might streamline the regulatory process without needing individual request approvals.
Amid these developments, 21Shares has filed a prospective application with the SEC for a new ETF that directly tracks the token of Ondo Finance, using Coinbase as a custodian. This application, which aims to mirror Ondo’s price using the CME CF Ondo Finance-Dollar Reference Rate, reflects ongoing interest in building investment tools around decentralized finance (DeFi) platforms. These moves highlight the heightened demand for diversified crypto offerings despite the SEC's cautious approach.
