Bitcoin News Today: SEC Halts Bitwise Crypto ETF Conversion Post-Approval, Spurring Industry Criticism

The U.S. Securities and Exchange Commission (SEC) is facing legal scrutiny after placing a stay on the conversion of Bitwise’s 10 Crypto Index Fund into a spot exchange-traded fund (ETF), despite having initially approved the move. The approval, issued by the SEC’s Division of Trading and Markets, was swiftly followed by a stay order from SEC assistant secretary Sherry Haywood under Rule 431 of the Securities Act. This action effectively halts the fund’s listing as an ETF until the Commission lifts the stay, creating regulatory uncertainty for the crypto asset class and ETF providers [1]. The conflicting decisions—approval and stay—occurred within hours of each other, raising questions about internal coordination and consistency in the SEC’s enforcement approach [2].

The Bitwise 10 Crypto Index Fund, which includes exposure to major cryptocurrencies like Bitcoin, Ethereum, and altcoins such as Solana and Ripple, had been trading since 2017. Its application to convert to an ETF was filed in November 2024 and initially approved for expedited review. However, the subsequent stay has drawn criticism from industry experts, who argue that the SEC’s actions undermine transparency and investor confidence. ETF Foundation President Nate Geraci described the situation as “bizarre,” emphasizing that the agency should allow approved conversions to proceed without further delay [3].

Legal experts and analysts are speculating about the motives behind the stay. Finance lawyer Scott Johnsson suggested that the SEC may have intentionally approved the application under delegated authority to later reverse the decision, potentially to avoid penalizing Grayscale’s Digital Large Cap Fund (GDLC) for a similar earlier reversal [4]. Bloomberg ETF analyst Eric Balchunas posited that the delay might allow the SEC to finalize generic listing standards before broader approvals, with a possible resolution expected by October [5]. Grayscale, which also faced a stay on its ETF conversion earlier this month, has contested the SEC’s timeline, asserting that the 240-day statutory period for approval has expired. The firm has threatened legal action to lift the stay, aiming to secure a first-mover advantage in the market [6].

The SEC’s use of Rule 431 has drawn particular criticism for enabling unilateral reviews of staff-level decisions without public justification. This has created a regulatory limbo for crypto ETF applicants, with projects approved at the staff level now facing indefinite delays. Nate Geraci highlighted the risk of arbitrary delays, which could deter institutional participation in crypto ETF development due to the unpredictable approval process [7]. The lack of clarity also raises concerns about the SEC’s ability to enforce consistent oversight, potentially leading to regulatory arbitrage as other jurisdictions establish clearer frameworks [8].

The implications of the stay extend beyond Bitwise. The SEC’s handling of both the Bitwise and Grayscale applications has intensified debates about internal divisions within the agency. Some analysts speculate that the delays may reflect strategic efforts to extend the SEC’s authority beyond statutory deadlines or address dissent among commissioners. Critics argue that the agency’s cautious approach, while aimed at protecting investors, risks stifling innovation in the crypto market [9].

As the SEC’s final decision on Bitwise’s application is not due until next week, the regulator’s next steps will be closely watched. If the stay remains in place, it could prompt further legal challenges and delay the broader approval of crypto ETFs, including those focused on single-asset altcoins. The outcome of this regulatory tug-of-war will likely shape the trajectory of crypto integration into traditional financial markets.

Sources:

[1] [Cointelegraph](https://cointelegraph.com/news/sec-pauses-bitwise-crypto-etf-after-approval)

[2] [CoinDesk](https://www.coindesk.com/policy/2025/07/22/sec-approves-then-pauses-bitwise-s-bid-to-convert-bitw-crypto-index-fund-to-etf)

[3] [The Block](https://www.theblock.co/post/363901/us-sec-approved-conversion-of-the-bitwise-crypto-index-fund-then-hit-pause)

[4] [Decrypt](https://decrypt.co/331357/sec-halts-another-etf-holding-bitcoin-ethereum-xrp)

[5] [Yahoo Finance](https://finance.yahoo.com/news/sec-approves-immediately-pauses-bitwises-215055666.html)

[6] [Coinpaper](https://coinpaper.com/10104/sec-approves-then-stays-bitwise-crypto-etf-conversion)

[7] [AInvest](https://www.ainvest.com/news/bitcoin-news-today-sec-approves-pauses-bitwise-crypto-etf-conversion-1-68b-index-fund-enters-regulatory-limbo-2507/)