SEC abruptly reverses Bitwise 10 Crypto ETF approval citing Rule 431, echoes Grayscale suspension.

The U.S. Securities and Exchange Commission (SEC) abruptly reversed its initial approval of Bitwise’s 10 Crypto Index Fund’s conversion to an exchange-traded fund (ETF) hours after granting the nod on July 22, 2025. Deputy Secretary Sherry R. Haywood cited Rule 431—a provision enabling discretionary reviews—to halt the process, citing the need for further evaluation. This decision mirrors a similar suspension of Grayscale’s ETF approval earlier this year, highlighting the SEC’s inconsistent and opaque approach to crypto-related products.

The sudden reversal has left Bitwise’s plans in limbo, with no timeline provided for the review. The 10 Crypto Index Fund, which tracks a basket of cryptocurrencies including XRP, was initially approved by the SEC’s Division of Trading and Markets. However, the agency’s lack of transparency around the suspension has fueled speculation about internal disagreements or strategic delays. The move effectively blocks direct institutional access to altcoins via spot-based ETFs, complicating demand for diversified crypto exposure in traditional portfolios.

Industry analysts have linked the SEC’s actions to broader regulatory uncertainty. Scott Johnsson of Van Buren Capital suggested the initial approval may have been a calculated move to anticipate objections from Democratic Commissioner Caroline Crenshaw, while James Seyffart of Bloomberg Intelligence posited that the delay is a buffer to allow for a clearer regulatory framework. Both analyses underscore the SEC’s reluctance to establish standardized guidelines for crypto ETFs, despite recent hints at potential reforms.

The SEC’s lack of a consistent framework has created challenges for asset managers. While spot-based Bitcoin and Ethereum ETFs have gained traction, altcoins remain under intense scrutiny. XRP’s ongoing legal issues with the SEC may have further complicated the approval process. Grayscale’s GDLC ETF, which also holds a diversified altcoin portfolio, faces a similar regulatory stalemate, despite earlier signals of approval. This inconsistency undermines investor confidence and complicates strategic planning for firms seeking to navigate the evolving landscape.

Market participants now await clarity on the SEC’s next steps. Bitwise has not indicated whether it will appeal the decision or modify its fund structure to meet regulatory expectations. In the interim, investors seeking exposure to altcoins remain reliant on leveraged or futures-based ETFs, which carry distinct risks compared to direct holdings. The absence of straightforward, cost-effective access to crypto assets may slow institutional adoption, with analysts noting that a universal listing framework for crypto ETFs is still pending by late 2025.

The SEC’s actions underscore the tension between fostering innovation and safeguarding investors. While the agency has shown a more open stance toward crypto in 2025, its recent reversals suggest a cautious, risk-averse strategy for altcoins. Until a transparent and predictable regulatory process is established, the future of crypto ETFs in the U.S. will remain uncertain. The outcome of Bitwise’s case could set a precedent for future applications, shaping the trajectory of the market for years to come.