DeFi's Bridge to Wall Street: HYPE ETF Seeks SEC Approval for Mainstream Access

Bitwise Asset Management has submitted an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) to launch a spot exchange-traded fund (ETF) tied to Hyperliquid’s HYPE token, a native asset of the decentralized finance (DeFi) protocolBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. This would mark the first ETF offering investors regulated exposure to a prominent DeFi protocol beyond Bitcoin and EthereumBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The proposed fund will hold physical HYPE tokens in a custody account managed by Coinbase Custody Trust Company, enabling investors to participate in price movements through traditional brokerage accounts without direct blockchain interaction. The ETF will use a daily net asset value (NAV) benchmark to reflect market pricingBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1].

A key feature of the HYPE ETF is its in-kind creation and redemption mechanism, approved by the SEC in July. This allows authorized participants to exchange ETF shares directly for HYPE tokens, reducing costs and operational friction compared to cash-based methodsBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The structure aligns with the SEC’s broader efforts to streamline crypto ETF approvals, though the HYPE ETF falls outside the agency’s recently adopted generic listing standards due to the absence of regulated Hyperliquid futures contractsBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. As a result, the fund faces the standard 240-day review periodBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1].

Hyperliquid, a Layer 1 blockchain focused on perpetual futures trading, has seen fluctuating volumes amid competition from platforms like Aster. The HYPE token serves as a utility asset, offering reduced fees on the decentralized exchange and acting as the protocol’s transactional currencyBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The ETF’s approval could enhance market credibility for mid-sized DeFi tokens, increasing capital availability for blockchain-based finance. However, the SEC’s ongoing scrutiny of custody, compliance, and investor protections remains a critical hurdleBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1].

The SEC’s handling of Bitwise’s other crypto ETF applications has added uncertainty. In July, the agency abruptly paused its approval of the Bitwise 10 Crypto Index Fund’s conversion to an ETF, despite initial staff clearanceBitwise Crypto ETF Faces Sudden Pause After Surprise Approval …^[2]. Similar delays have affected applications for spot Bitcoin and Ether ETFs, with the SEC extending reviews under Rule 431 to allow full commission evaluation. This pattern mirrors the recent pause of Grayscale’s Digital Large Cap Fund, raising questions about regulatory consistency.

Bitwise’s HYPE ETF filing highlights the SEC’s evolving approach to crypto products. While the agency has introduced generic listing standards to expedite approvals for tokens traded on CFTC-regulated markets for six months, the HYPE ETF’s lack of such a market may prolong its reviewBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1]. The firm has also faced delays in converting its BITW index fund to an ETF, underscoring the regulatory complexities of crypto product innovationBitwise Crypto ETF Faces Sudden Pause After Surprise Approval …^[2].

The approval of the HYPE ETF could signal a pivotal moment for DeFi token adoption in traditional finance. By offering a regulated vehicle for exposure to a non-Bitcoin/Ethereum DeFi protocol, the ETF may attract institutional and retail investors seeking diversified crypto access. However, the SEC’s cautious stance, combined with the absence of a clear timeline for final approval, leaves the fund’s launch date uncertainBitwise Files S-1 with SEC for Spot HYPE ETF | BanklessTimes^[1].