SEC Approves Bitwise Crypto ETF, Then Pulls the Rug Hours Later

On July 22, 2025, the U.S. Securities and Exchange Commission (SEC) sent shockwaves through the crypto community by greenlighting Bitwise’s 10 Crypto Index ETF, only to slam the brakes with a stay order for further review mere hours later. This regulatory flip-flop reeks of indecision and highlights the maddening uncertainty that continues to stunt the growth of cryptocurrency investment products, even as institutional demand surges to unprecedented levels.

• Regulatory Whiplash: SEC approves Bitwise ETF, then issues a stay order under Rule 431 for more scrutiny within hours.
• ETF Breakdown: Tracks ten cryptocurrencies, with nearly 90% in Bitcoin and Ethereum, plus altcoins like Solana and XRP.
• Industry Impact: Exposes systemic regulatory chaos with 72 pending ETF applications amid soaring institutional interest.

From Approval to Reversal: What Went Down with Bitwise?

Bitwise, a well-known asset management firm with a track record in crypto since 2017, sought to convert its existing Bitwise 10 Crypto Index Fund (BITW)—managing $1.68 billion with a steep 2.5% expense ratio—into a spot ETF. For the uninitiated, a spot ETF holds the actual underlying assets, unlike futures-based products, meaning investors get direct exposure to cryptocurrencies without wrestling with wallets or sketchy exchanges. The proposed ETF tracks a diversified basket of ten digital assets, with Bitcoin dominating at 78.72% of the allocation, Ethereum at 11.10%, and the rest spread across altcoins like XRP, Solana, Cardano, Avalanche, Chainlink, Bitcoin Cash, Uniswap, and Polkadot. With nearly 90% tied to Bitcoin and Ethereum—both already blessed with standalone spot ETFs—the proposal seemed like a no-brainer under current SEC guidelines.

NYSE Arca, the exchange slated to list the fund, even got the green light to tweak its listing rules, and the SEC initially found the plan aligned with Exchange Act standards for preventing fraud and protecting investors. So, why the sudden reversal? Hours after the accelerated approval, SEC Assistant Secretary Sherry Haywood issued a stay order under Rule 431—a procedural “pause button” that halts an action for further review, often due to unresolved legal or policy questions. Industry speculation points to internal disagreements within the SEC over multi-asset crypto ETFs, particularly since tokens like XRP and Cardano lack standalone ETF approvals and remain in a regulatory gray zone. This isn’t a one-off; a similar pause hit Grayscale’s Digital Large Cap Fund, which mirrors Bitwise’s heavy Bitcoin (79.9%) and Ethereum (11.3%) weighting. The SEC’s hot-and-cold routine is wearing thin, and it’s stalling progress in a space desperate for clarity. For more on this chaotic turn of events, check out the initial report on the SEC’s approval and reversal of Bitwise’s ETF.

Why Multi-Asset ETFs Matter for Crypto Adoption

Multi-asset crypto ETFs like Bitwise’s aren’t just another financial product—they’re a potential gateway for mainstream adoption. They bundle exposure to a range of cryptocurrencies into a single, tradable vehicle on traditional stock exchanges, lowering the barrier for risk-averse investors who shy away from the complexities of direct crypto ownership. Imagine a retiree wanting some crypto exposure without touching a hardware wallet; an ETF offers that bridge. For Bitcoin maximalists, these funds might seem like a distraction from the king of crypto, diluting focus from BTC’s unassailable store-of-value case. But even maximalists can’t ignore the spillover effect: more diversified crypto products mean more liquidity and attention flowing into the broader market, indirectly boosting Bitcoin’s relevance.

On the flip side, the inclusion of altcoins introduces risks that Bitcoin-only funds sidestep. Many of these tokens—take Cardano, for instance—face scrutiny over slow development progress and limited real-world adoption, despite passionate communities. Solana, while blazing fast, has had its share of network outages, raising questions about reliability. The SEC’s hesitation, while infuriating, isn’t entirely baseless when you consider the volatility and speculative nature of some altcoins. Investor protection is a real concern, but dragging approvals through bureaucratic mud while billions in institutional capital wait on the sidelines makes the agency look painfully out of touch. For deeper insights into the regulatory uncertainty surrounding these products, take a look at this analysis of SEC internal disagreements on multi-asset ETFs.

Institutional Hunger for Crypto ETFs Ignores Regulatory Noise

Despite the SEC’s antics, Wall Street’s appetite for crypto exposure remains ravenous. Ethereum ETFs alone raked in $533.87 million in net inflows on July 22, marking the third-highest day since their launch, with BlackRock’s ETHA fund leading the charge at $426.22 million. Over time, Ethereum ETFs have pulled in a cumulative $8.32 billion, managing over $10 billion in assets—equivalent to 2.24% of Ethereum’s circulating supply. Bitcoin ETFs, though hit with $67.93 million in outflows on the same day (with Ark Invest’s ARKB taking a notable dent), still command a staggering $154.77 billion in assets, representing 6.5% of Bitcoin’s total market cap.

These figures aren’t just numbers—they scream a clear message: institutional players, from hedge funds to pension funds exploring crypto allocations, are piling in regardless of regulatory hiccups. But let’s not get too starry-eyed. Some of this capital could be “hot money”—short-term speculative bets rather than long-term commitment. Still, the sheer scale of investment signals a disconnect between the SEC’s caution and the market’s readiness to embrace decentralized finance through traditional vehicles. If anything, this momentum strengthens the case for why delays like Bitwise’s are so frustrating. For a closer look at the growing institutional demand, see this report on Bitcoin and Ethereum ETF adoption trends.

Regulatory Roadblocks: A Systemic Mess Beyond Bitwise

The Bitwise saga is just the tip of the iceberg. There are 72 other crypto-related ETF applications gathering dust in the SEC’s queue, from industry giants like Grayscale, CoinShares, Franklin Templeton, and VanEck. Some proposals get niche—21Shares has filed for an ONDO token ETF tied to Ondo Finance, a layer-1 blockchain focused on institutional asset tokenization, while Canary Capital is pushing a SUI ETF. Decisions on altcoin ETFs have been repeatedly delayed, with the SEC pushing deadlines from March to October under the guise of needing “longer review periods.” Bloomberg Intelligence throws out a 95% approval odds for Solana, XRP, and Litecoin ETFs in 2025, but given the SEC’s track record of indecision, I’ll hold my applause.

Historically, the SEC has been a tough nut to crack on crypto products. Bitcoin and Ethereum spot ETFs only got the nod after years of rejections and legal battles—Grayscale’s 2023 lawsuit against the SEC was a turning point. Under former Chairman Gary Gensler, the agency leaned on “regulation by enforcement,” essentially suing first and figuring out rules later. Current SEC Chairman Paul Atkins seems to be pivoting toward sanity with a dedicated crypto task force aimed at crafting clear guidelines. There’s even talk of an “innovation exemption” for tokenization projects, which could open doors for real-world asset (RWA) tokenization—think digitizing property or bonds on-chain via platforms like Ondo Finance. If this pans out, multi-asset ETFs might face fewer hurdles down the line. But until those rules are etched in stone, we’re stuck with infuriating plot twists like this one. For community perspectives on this shift, check out these Reddit discussions on the SEC’s crypto task force under Atkins.

Bitwise’s Own Baggage: High Fees and Unanswered Questions

Let’s not paint Bitwise as a blameless victim here. Their existing BITW fund charges a 2.5% expense ratio—a yearly fee that means $25 for every $1,000 invested. Compared to traditional ETFs, often under 0.5% from firms like BlackRock, that’s borderline highway robbery. Converting to a spot ETF could slash costs, making crypto exposure more accessible, but Bitwise hasn’t been upfront about fee adjustments post-conversion. Investors deserve clarity, not just promises of diversification. If they’re serious about driving adoption, transparency on costs should be priority one—otherwise, it’s just another profit grab dressed as innovation. For more on the specifics of Bitwise’s filing, refer to the official SEC documentation on the approval reversal.

Decentralization vs. Bureaucracy: The Bigger Picture

Zooming out, this debacle is a microcosm of the tension between decentralization’s promise and centralized bureaucracy’s chokehold. Bitcoin remains the bedrock of this financial revolution—a censorship-resistant, borderless store of value that no regulator can fully tame. Yet altcoins and other blockchains like Ethereum, with its smart contract dominance, or Solana, with its high-speed transactions, carve out vital niches that Bitcoin alone can’t (and arguably shouldn’t) fill. Multi-asset ETFs, for all their risks, showcase this diversity and pull traditional finance into the fold. The SEC’s role isn’t to gatekeep progress but to ensure a fair playing field—something they’re failing at spectacularly right now. For a broader perspective on regulatory impacts, see this overview of SEC regulations affecting crypto ETFs in 2025.

Still, there’s a silver lining in the chaos. Institutional billions flooding into Bitcoin and Ethereum ETFs prove the appetite for crypto isn’t fading. Every regulatory stumble fuels the case for effective accelerationism—pushing decentralized systems forward faster to outpace outdated oversight. The future of money won’t wait for bureaucrats to catch up; it’s being built on-chain, whether they like it or not. Curious about community reactions to this specific case? Dive into this Reddit thread discussing Bitwise’s ETF reversal.

What’s Next for Crypto ETFs and Regulation?

Looking ahead, the Bitwise ETF’s fate hinges on the SEC’s next move during this “further review.” Will they clarify their stance on altcoins in multi-asset funds, or just kick the can down the road again? Broader altcoin ETF approvals might pick up steam in 2025 if Atkins’ task force delivers actionable rules, but don’t hold your breath. For now, firms like Bitwise and Grayscale are caught in limbo, while institutional demand keeps pounding at the door. One thing’s clear: the push for decentralized finance isn’t slowing down, and these regulatory speed bumps are just fuel for the fire. We’re betting on innovation outrunning red tape—because in the end, code doesn’t need permission. For additional context on Bitwise’s journey, explore this detailed summary of the SEC’s handling of Bitwise’s ETF.

If you’re wondering about the broader accuracy of past predictions on SEC approvals for crypto ETFs, this Quora discussion on SEC reversals and predictions offers some historical perspective.

Key Questions and Takeaways for Crypto Enthusiasts

• What triggered the SEC’s reversal on Bitwise’s Crypto ETF?
  After approving the multi-asset ETF on July 22, 2025, the SEC issued a stay order hours later for further review, likely due to internal debates over altcoins like XRP and Cardano lacking standalone ETF approvals.
• How does this regulatory uncertainty affect crypto adoption?
  It creates a shaky environment for investors and firms, stalling progress with 72 pending ETF applications, though institutional inflows into Bitcoin and Ethereum ETFs show demand remains robust.
• Are multi-asset crypto ETFs a game-changer?
  They could be, by offering diversified crypto exposure to mainstream investors, but risks from volatile altcoins and high fees—like Bitwise’s 2.5% expense ratio—call for caution over hype.
• Is there a light at the end of the regulatory tunnel?
  Potentially, with SEC Chairman Paul Atkins’ crypto task force and talks of “innovation exemptions” for tokenization hinting at clearer rules, though the pace of change is glacial.
• Why should Bitcoin maximalists pay attention to altcoin ETFs?
  While they might dilute Bitcoin’s focus, these products drive broader market liquidity and mainstream interest, indirectly strengthening BTC’s position—even if they come with altcoin baggage.