XRP News Today: SEC Halts Bitwise ETF Conversion Under Rule 431(e) XRP Drops 6%

The U.S. Securities and Exchange Commission (SEC) has paused the conversion of Bitwise’s 10 Crypto Index Fund (BITW) into a spot exchange-traded fund (ETF) hours after initially approving the proposal on July 7, 2025. The decision, cited as a reversal under Rule 431(e) of the Securities Act of 1933, halted the fund’s transition from a crypto index fund to a multi-asset ETF that would include Bitcoin, Ethereum, XRP, and other altcoins. The move follows a pattern seen in recent regulatory actions, including the SEC’s earlier suspension of Grayscale’s mixed crypto fund, raising questions about inconsistencies in the approval process for crypto investment products. Sherry R. Haywood, SEC Assistant Secretary, issued the formal stay order, stating the agency would conduct a full Commission review before allowing the conversion to proceed [1][3][5].

The BITW fund, which holds 90% of its assets in Bitcoin and Ethereum and 10% in altcoins like Solana and Litecoin, was touted as a milestone for broadening institutional access to cryptocurrencies. With $1.68 billion in assets under management, the fund had been positioned as one of the most anticipated crypto ETFs. However, the sudden regulatory reversal has exacerbated market uncertainty, triggering price volatility across the included cryptocurrencies. XRP, for instance, dropped by 6% following the approval delay, reflecting heightened sensitivity to regulatory developments [2][6][9].

Industry analysts have criticized the SEC’s approach, arguing that the agency’s use of Rule 431(e)—a provision allowing regulators to revoke effective registrations under specific circumstances—lacks transparency and undermines investor confidence. James Seyffart, an ETF analyst at Bloomberg, noted that the pause indicates the ETF has been “stayed by either one or multiple commissioners. Meaning they cannot actually convert it into an ETF…yet,” highlighting the agency’s fragmented decision-making [7]. Critics further argue that the SEC’s inconsistent enforcement of compliance standards for altcoin-heavy portfolios creates regulatory ambiguity, complicating market participants’ ability to plan for product launches [4][8].

The BITW reversal underscores broader regulatory challenges in the crypto sector. While Bitcoin and Ethereum have seen incremental acceptance, altcoins remain under scrutiny due to concerns over market manipulation, custody risks, and the lack of institutional infrastructure. The SEC’s focus on compliance with alternative cryptocurrency exposures in BITW’s portfolio reflects these tensions. Proponents of the agency’s stance emphasize the need for rigorous oversight to protect investors in a volatile market, while critics contend that delays disproportionately harm smaller altcoin holders by reducing liquidity and stifling innovation [1][6].

The SEC’s actions also highlight the sector’s evolving dynamics. As more crypto ETF applications are pending, the agency’s handling of BITW could influence future product deployments and investor strategies. Bitwise has not yet commented on next steps, but the incident reinforces calls for a standardized approval process. The outcome of the SEC’s full review may set a precedent for how regulators balance innovation with risk mitigation in the digital asset space [2][9].

Source:

[1] [title1] [url1] https://www.bloomberg.com/news/articles/2025-07-23/sec-halts-approval-of-bitwise-etf-offering-broad-crypto-exposure

[2] [title2] [url2] https://www.pionline.com/asset-management/exchange-traded-funds/pi-sec-approves-pauses-bitwise-crypto-etf/

[3] [title3] [url3] https://news.bloomberglaw.com/securities-law/sec-halts-approval-of-bitwise-etf-offering-broad-crypto-exposure

[4] [title4] [url4] https://cryptopotato.com/bitwises-10-crypto-etf-approved-but-stayed-in-bizarre-move/

[5] [title5] [url5] https://seekingalpha.com/news/4470912-sec-approves-then-suspends-bitw-conversion-in-same-day

[6] [title6] [url6] https://cointelegraph.com/news/sec-pauses-bitwise-crypto-etf-after-approval

[7] [title7] [url7] https://www.ainvest.com/news/sec-approves-halts-bitwise-1-68b-crypto-etf-conversion-full-review-2507/

[8] [title8] [url8] https://www.ainvest.com/news/xrp-news-today-sec-approves-pauses-bitwise-crypto-etf-rule-431-altcoin-concerns-2507/

[9] [title9] [url9] https://coinpedia.org/news/bitwise-gets-xrp-etf-approval-from-sec-but-trading-halted/