US SEC Approves Bitwise Crypto Index Fund Holding BTC, ETH, XRP To Convert Into ETF

The U.S. Securities and Exchange Commission (SEC) has approved the accelerated conversion of the ten Bitwise crypto index fund into an exchange-traded fund (ETF).

However, regulators immediately issued a stay, which effectively delayed the ETF’s launch. Market analysts sharply criticized this decision, questioning the rationale behind the postponement.

SEC Approves Bitwise Crypto Index Conversion

According to official SEC documentation, the proposed ETF aims to mirror the performance of the Bitwise crypto index, a diversified benchmark that comprises a portfolio of leading digital assets.

Additionally, Bitcoin (78.72%) and Ethereum (11.10%) heavily weight the index’s composition, while XRP holds a smaller allocation (4.97%). The remaining portion of the index includes other prominent cryptocurrencies such as Solana, Cardano, SUI, Chainlink, Avalanche, Litecoin, and Polkadot, reflecting a broad exposure to the digital asset landscape.

Notably, Coinbase Custody will securely store the crypto assets as the designated custodian. BNY Mellon will manage cash and perform administrative duties.

The fund’s structure adheres to stringent SEC guidelines. To meet these requirements, the ETF will allocate at least 85% of its holdings to crypto assets, primarily Bitcoin and Ethereum, that have already received regulatory approval for exchange-traded products.

This allocation to established cryptocurrencies aims to provide stability and reduce regulatory risk. The fund will allocate the remaining 15% of its portfolio to emerging tokens, including XRP and Solana, which have not yet secured the same level of regulatory clearance.

Conversion Approval Hit Road Block

The operational framework for the Bitwise crypto index fund incorporates a mechanism for the creation and redemption of shares in large blocks known as Creation Units.

Moreover, this mechanism is a standard practice for crypto-based ETFs, enabling efficient arbitrage and ensuring that the ETF’s market price remains closely aligned with the net asset value of its underlying holdings.

Notably, despite the SEC’s initial approval of the ETF’s conversion, the order has been subjected to a stay based on Rule 431(e). This regulatory action effectively prevents the ETF from commencing trading until the Commission completes a further review of the matter.

Nate Geraci, president of The ETF Store, strongly criticized the SEC’s decision to delay the launch of the Bitwise crypto index ETF. Geraci described the regulatory stay as “bizarre” in an X post, arguing that the SEC should permit both the Bitwise and Grayscale ETFs to convert and uplist to national exchanges immediately.

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