It was a celebrative moment for crypto asset management platform Bitwise when the US Securities and Exchange Commission (SEC) initially approved conversion of its 10 Crypto Index Fund into an ETF holding. However, the positive moment quickly faded when the SEC immediately paused the approval. Bitwise’s 10 Crypto Index Fund includes a mix of 10 cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Cardano (ADA), Sui (SUI), Litecoin (LTC), Polkadot (DOT), Chainlink (LINK), and Avalanche (AVAX). Before we check the reasons for sudden halt in approval, let’s understand what a Crypto Index Fund means and why crypto platforms convert it to ETFs.
What is a Crypto Index Fund?
Crypto Index Fund is much like a crypto ETF. Both are investment vehicles that store funds in the form of cryptocurrencies. Crypto Index Fund is a basket of cryptocurrencies typically measured by market capitalization. This fund is not tradable on stock exchanges, whereas crypto ETF can be traded on stock exchanges.
What are the benefits of converting Crypto Index Fund into ETF?
When you invest in crypto ETFs, your holdings are less risky than investing in whole crypto. Also, you do not need a wallet for storage, making you less worried about protecting private keys. When you buy a share of a crypto via ETF, you get access to several other coins. And most importantly, you do not have to spend a lot buying a whole cryptocurrency; spend less and just buy a few shares of coins!
Could there be a reason for a sudden pause?
On Tuesday, Bitwise received approval from the SEC to convert 10 Crypto Index Fund into an ETF, and on the same day, the assistant secretary Sherry Haywood said that the “order is stayed until the Commission orders otherwise,” and the “commission will review the delegated action.” The crypto asset company filed for the conversion back in November 2024.
No reports showed any reasons for an immediate pause in approval. The current state of Bitwise resembles that of crypto asset manager Grayscale. The Grayscale Digital Large Cap ETF applied for converting an OTC-traded fund into a regulated spot ETF; however, the SEC stayed the file.
ETF experts and crypto kings have expressed their opinion on SEC’s hit on Bitwise, connecting the case with that of Grayscale.
Finance lawyer Scott Johnsson commented: “I have to wonder what is going on at the SEC. I can excuse GDLC as an unforeseen unilateral Crenshaw wrench, but this shouldn’t happen again here.”
According to a crypto news portal, one possible reason for SEC’s action could be due to uncertainty surrounding specific cryptocurrencies within the fund, specifically Cardano and XRP, which do not have standalone spot ETFs.
