Overview of the SEC's Decision
The U.S. Securities and Exchange Commission (SEC) has postponed its decision regarding Bitwise's proposal to convert its crypto index fund into an exchange-traded fund (ETF). The new deadline for approval, rejection, or further review is set for March 3, 2025.
In its announcement, the SEC stated:
"The Commission believes it is appropriate to designate a longer period for action on the proposed rule change to allow sufficient time to consider the proposed rule change and the issues raised therein."
This extension aligns with the SEC's authority to broaden its review process, ensuring a thorough evaluation of the potential impacts under the Securities Exchange Act.
Key Dates and Public Comments
- NYSE Arca initially submitted the application on November 15, 2024.
- The SEC published the proposed rule change in the Federal Register on December 2, 2024, initiating a public comment period.
- As of the latest update, no public comments have been received.
Bitwise's Proposal and SEC's Concerns
Bitwise 10 Crypto Index Fund (BITW)
- Assets Under Management (AUM): $1.4 billion (traded on OTCQX).
- Top Holdings: Bitcoin (75.14%), Ethereum (16.42%), and other major crypto assets like Solana (SOL), XRP, and Cardano (ADA).
Bitwise CEO Hunter Horsley highlighted the benefits of converting BITW to an ETF:
- Improved operational efficiency.
- Stronger investor protections.
- Closer alignment with net asset value (NAV).
SEC's Cautious Approach
The delay reflects the SEC's broader regulatory concerns about crypto-related investment products, including:
- Market manipulation risks.
- Liquidity challenges.
- Investor protection gaps.
Matt Hougan, Bitwise’s Chief Investment Officer, emphasized BITW’s role as a pioneer in crypto index-based investing:
"BITW has aimed to provide investors diversified exposure to the transformative potential of the crypto market since its inception."
Market Context and Recent Trends
Spot Bitcoin ETFs Face Outflows
- Over four days, $1.2 billion flowed out of U.S. spot Bitcoin ETFs.
- BlackRock’s IBIT recorded the largest outflow ($219.48 million).
- Bitwise’s BITB saw an $8.93 million outflow.
Other SEC Delays and Approvals
- Grayscale’s request to convert its hybrid crypto fund to an ETF may also face delays.
- In December 2025, the SEC approved Hashdex and Franklin Templeton’s Bitcoin/Ethereum mixed ETFs.
- Bitwise has also filed for an XRP ETF.
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Impact on Bitwise and Industry Moves
Osprey Funds’ Withdrawal
- Osprey Funds terminated its agreement with Bitwise to convert its Bitcoin Trust (OBTC) into an ETF due to pending regulatory approvals.
- The firm plans to announce alternative strategies for OBTC investors soon.
FAQ Section
1. Why did the SEC delay Bitwise’s ETF decision?
The SEC seeks more time to evaluate market risks, liquidity, and investor protections tied to crypto ETFs.
2. What is the new deadline for Bitwise’s application?
March 3, 2025 — the SEC will approve, reject, or extend its review.
3. How does BITW differ from other crypto funds?
BITW tracks the top 10 crypto assets by market cap, offering diversified exposure with a focus on Bitcoin and Ethereum.
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Final Thoughts
The SEC’s cautious stance underscores the complex regulatory landscape for crypto ETFs. Bitwise’s proposal, if approved, could set a precedent for similar products, balancing innovation with investor safety.