SEC Faces DeFi ETF Test with Bitwise’s HYPE Proposal

Bitwise Asset Management has submitted an S-1 registration statement to the U.S. Securities and Exchange Commission (SEC) to launch the first exchange-traded fund (ETF) directly linked to HYPE, the native token of the Hyperliquid blockchainBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The proposed Bitwise Hyperliquid ETF aims to provide investors with regulated exposure to a decentralized finance (DeFi) protocol outside the well-established Bitcoin and Ethereum marketsJUST IN: Bitwise Files S-1 for First-Ever HYPE ETF with SEC^[2]. If approved, the fund would mark a significant milestone for mid-sized DeFi tokens, enhancing market credibility and capital accessibility for blockchain-based financeHyperliquid (HYPE) Price: Could ETF Filing Push Token to $55 …^[3].

The ETF will hold physical HYPE tokens in a custody account managed by Coinbase Custody Trust Company, allowing investors to participate in HYPE price movements through traditional brokerage accounts without direct blockchain interactionBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The fund will use a daily net asset value (NAV) benchmark to reflect market pricing. A key feature is its in-kind creation and redemption mechanism, approved by the SEC in July for crypto productsBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. This process enables authorized participants to exchange ETF shares for HYPE tokens instead of cash, reducing operational costs and friction compared to traditional methodsJUST IN: Bitwise Files S-1 for First-Ever HYPE ETF with SEC^[2].

Hyperliquid operates as a Layer 1 blockchain focused on perpetual futures trading and DeFi applications. The HYPE token serves as a utility asset, granting users reduced fees on the decentralized exchange and acting as the native currency for transaction paymentsBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. However, the protocol faces intensified competition from rivals like Aster, which recently surpassed Hyperliquid in trading volume and open interestBitwise Files to Launch Hyperliquid ETF with HYPE Token^[4]. Despite this, institutional interest in Hyperliquid has grown, evidenced by a $10 million treasury expansion by Hyperion DeFi, increasing its HYPE holdings to over 1.7 million tokensHyperliquid (HYPE) Price: Could ETF Filing Push Token to $55 …^[3].

The SEC approval process for the ETF remains uncertain. The filing does not specify the listing exchange, ticker symbol, or fee structureBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The application falls outside the SEC’s newly adopted generic listing standards for spot crypto ETFs, as there are no regulated Hyperliquid futures contracts available for surveillanceBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. This means the fund faces the standard extended review period, potentially lasting up to 240 days after the required Form 19b-4 filingBitwise Files to Launch Hyperliquid ETF with HYPE Token^[4]. Analysts note that the lack of CFTC-registered HYPE futures could delay approval timelinesHyperliquid (HYPE) Price: Could ETF Filing Push Token to $55 …^[3].

Market reactions to the ETF filing have been mixed. While the HYPE token has not seen immediate price surges, remaining at $42.32JUST IN: Bitwise Files S-1 for First-Ever HYPE ETF with SEC^[2], technical analysis suggests potential for a rebound to $55 if support levels holdHyperliquid (HYPE) Price: Could ETF Filing Push Token to $55 …^[3]. Institutional confidence in the token is evident, with Hyperion DeFi’s treasury expansion and growing ecosystem developmentHyperliquid (HYPE) Price: Could ETF Filing Push Token to $55 …^[3]. However, competition in the decentralized exchange (DEX) market remains fierce, with Aster’s 24-hour trading volume reaching $35.8 billion—more than triple Hyperliquid’s $10 billionBitwise Files to Launch Hyperliquid ETF with HYPE Token^[4].

If approved, the Bitwise Hyperliquid ETF could catalyze broader institutional adoption of DeFi tokens, offering regulated access and liquidity to a market segment previously underserved by traditional financial instrumentsJUST IN: Bitwise Files S-1 for First-Ever HYPE ETF with SEC^[2]. The ETF’s structure aligns with the SEC’s recent efforts to streamline crypto product approvals, though the absence of HYPE futures complicates the processBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The outcome will hinge on the SEC’s evaluation of custody practices, compliance frameworks, and investor protections, with broader implications for the regulatory landscape of crypto assetsBitwise Files to Launch Hyperliquid ETF with HYPE Token^[4].