SEC suspends Bitwise crypto fund approval amid internal tensions and procedural challenges

The U.S. Securities and Exchange Commission’s (SEC) accelerated approval of a cryptocurrency index fund has stalled, revealing internal tensions and procedural challenges in its regulatory approach. Bitwise’s BITW fund, which tracks a basket of cryptocurrencies including Bitcoin, Ethereum, XRP, Solana, and Polkadot, received an initial green light on July 22, 2025, from the SEC’s Division of Trading and Markets via a fast-track process. However, the same day, Deputy Secretary Sherry R. Haywood announced a review of the decision under Rule 431 of the SEC’s regulations, effectively suspending the approval. This move mirrors a previous reversal in Grayscale’s ETF conversion process, where initial accelerated approval was later rescinded.

The suspension highlights the SEC’s struggle to balance efficiency with regulatory scrutiny. Haywood’s letter indicated that the review would remain open indefinitely under the delegated authority framework, rendering the fast-track approval “practically ineffective.” The decision coincides with the agency’s broader efforts to establish a standardized framework for cryptocurrency ETFs, potentially streamlining the current 19b-4 form process, which can take up to 240 days. Analysts speculate that the review may be a strategic pause to avoid precedents that could pressure the SEC to expedite approvals for other crypto ETF applications.

Scott Johnsson of Van Buren Capital and Bloomberg Intelligence’s James Seyffart both noted the SEC’s pattern of using procedural delays to buy time for policy development. Johnsson suggested the initial approval might have been intentional, acknowledging opposition from Democratic Commissioner Caroline Crenshaw or part of a planned strategy to avoid setting a precedent. Seyffart echoed this, stating the agency is likely “employing delay tactics” until a unified regulatory structure is finalized. These dynamics create uncertainty for market participants, as fast-track approvals now hinge on internal debates rather than clear procedural timelines.

The SEC’s review of crypto ETF applications has become a focal point for industry watchers. While the agency is evaluating proposals for a wide range of assets, from Solana to Dogecoin, no decisions are expected before September–October 2025. This delay underscores the complexity of aligning regulatory safeguards with market demand for innovation. Companies seeking accelerated approvals now face extended uncertainty, with compliance costs and operational risks increasing as the SEC refines its oversight mechanisms. The BITW case exemplifies how even seemingly straightforward approvals can be upended by internal procedural recalibrations.

The broader implications for market participants are significant. Firms reliant on fast-track mechanisms to secure capital or navigate regulatory hurdles must now factor in the SEC’s shifting priorities. The BITW suspension and Grayscale’s prior experience demonstrate that early approvals are not guarantees, particularly in nascent asset classes like cryptocurrencies. As the SEC works to finalize its framework, stakeholders are left to navigate a landscape where regulatory clarity remains elusive, and procedural delays are used strategically to manage expectations.

While the agency’s stated goal is to prevent financial instability, the current approach risks undermining confidence in its ability to deliver timely decisions. The BITW case and related suspensions suggest a regulatory process that prioritizes caution over momentum, potentially stifling market growth in the name of risk mitigation. As the SEC continues its review, the challenge will be to reconcile its dual mandates of protecting investors and fostering market innovation—without further eroding the predictability that underpins capital formation.