SEC freezes Bitwise ETF conversion hours after approval

The US Securities and Exchange Commission (SEC) has once again hit the brakes on a promising cryptocurrency exchange-traded fund (ETF), frustrating investors and raising questions about the future of digital asset products in regulated markets.

This week’s abrupt reversal affected Bitwise’s proposed multi-asset crypto index ETF – potentially the first of its kind in the United States – just hours after it was initially approved. 

Meanwhile, the ETF market continues to grow, with new filings such as 21Shares’ ONDO ETF making headlines and signalling continued confidence in decentralised finance (DeFi) tokens despite regulatory hesitation.

On Tuesday, Bitwise Asset Management briefly celebrated what could have been a major milestone in crypto investing. The firm had received approval to convert its $1.68 billion crypto index fund into an ETF. This move would have opened the door for broader institutional investment in a diversified basket of cryptocurrencies.

However, just hours later, that progress was halted. In a letter dated 22 July, SEC Assistant Secretary, Sherry Haywood, confirmed that the Commission would not allow the approval to take effect immediately. 

The letter stated that the order “is stayed until the Commission orders otherwise”, placing the fund’s conversion into regulatory limbo.

The fund in question is heavily weighted towards Bitcoin ($BTC) and Ethereum ($ETH), which together make up 90% of its holdings. The remaining 10% is spread across eight other cryptocurrencies. 

If given the final green light, Bitwise’s product would become the first multi-asset crypto index ETF in the country. But with the SEC’s sudden reversal, that outcome is once again uncertain.

This is not the first time the SEC has stepped in after initially approving a crypto ETF. A similar situation occurred earlier this year with Grayscale’s Digital Large Cap Fund. 

That product was also granted approval to convert into an ETF, only for the SEC to issue a stay shortly afterwards. No clear public explanation was provided at the time, and many saw the move as a troubling sign.

Bloomberg ETF analyst, James Seyffart, weighed in on the latest development. Writing on X, he said the SEC might be delaying the launch of crypto index ETFs because the agency still lacks a firm framework for these products. 

According to Seyffart, the decision could be “a strategic move” aimed at buying time until the SEC defines what digital assets qualify for ETF inclusion and how such products should be structured.

Seyffart added that the SEC may want to approve standalone ETFs for each included crypto asset before allowing them to be bundled into a broader index product. 

This approach would mean that until altcoins like Solana, Polkadot, or $XRP receive their own individual ETF approvals, index funds holding these coins may continue to face delays.

Grayscale, for its part, has pushed back against this regulatory approach. In a letter sent to the SEC on 8 July, the company’s legal team argued that the Commission had already approved its application through internal staff processes. 

The letter said the agency had “exceeded its authority” by reversing course after a formal approval had been issued.

This stop-and-start pattern has created uncertainty for asset managers and crypto investors alike. Many had viewed recent approvals as a signal that the regulatory environment was finally becoming more predictable. But the repeated stays suggest that even approved applications may be far from settled.

Several other asset management firms are currently awaiting responses from the SEC on their own crypto ETF filings. These include heavyweights such as Franklin Templeton, Fidelity, and 21Shares. 

While there is optimism that these applications may eventually succeed, the constant delays suggest that the SEC is still figuring out how to deal with multi-asset crypto funds.

21Shares files for Ondo ETF 

While the SEC pauses one ETF, another has just entered the review pipeline. On 22 July, Swiss-based investment firm 21Shares filed a proposal with the SEC to launch a new ETF called the “21Shares Ondo Trust”. 

The filing marks a significant moment for decentralised finance tokens and could open the door for even more non-layer-1 crypto assets to be packaged into ETFs.

The proposed ETF would track the value of ONDO, the native token of Ondo Finance. According to the filing, the fund will be structured as a passive investment vehicle. 

It will not use leverage, derivatives, or any speculative financial tools. Instead, the ETF will follow the price of ONDO using the CME CF Ondo Finance-Dollar Reference Rate.

The filing states: “This means the Sponsor does not speculatively sell ONDO at times when its price is high or speculatively acquire ONDO at low prices in the expectation of future price increases”.

To ensure security and compliance, Coinbase Custody Trust Company has been named as the fund’s custodian. This move reassures investors that the tokens will be held with institutional-grade safeguards. 

However, some parts of the proposal remain undefined – such as the name of the exchange on which the ETF will be listed. Those details will likely be confirmed later.

The application comes at a time when interest in real-world asset (RWA) tokenisation is growing fast. Ondo Finance, the company behind the ONDO token, focuses on putting traditional financial assets like US Treasuries and bonds onto blockchain platforms. 

The protocol allows these tokenised assets to generate secure yields, attracting attention from both retail and institutional investors.

The platform has already caught the eye of major players. Mastercard recently selected Ondo as its first real-world asset provider. Ripple has also tapped Ondo’s technology to launch OUSG, a tokenised asset on its XRPL blockchain.

Trader and analyst, Jeff Cook, commented that ONDO could become the “next institutional darling”. He said that smart investors were already positioning themselves ahead of the wider market, adding that “the 21Shares ETF could act as a gateway for institutional money to flow into ONDO”.

The ONDO token has performed strongly in recent weeks. Over the past month, it has surged by 64.7%. 

At the time of writing, ONDO is trading at around $1.11, up 6.47% in the past 24 hours. It has outperformed many other crypto assets during the same period.

On 23 July, Binance US confirmed it would begin listing ONDO on its trading platform. According to the exchange, deposits on the Ethereum blockchain opened the previous day, with ONDO/USDT trading set to begin shortly after.

“We’re excited to announce that ONDO is now listed on Binance.US. Deposits for ONDO on the Ethereum network are now open. Trading for ONDO/USDT will begin tomorrow, July 23, 2025, at 4 a.m. / 7 a.m. EDT”, the official post read. 

Market analysts see the listing as a major step in making the token accessible to a broader American audience. Until now, most US-based investors could only access ONDO through decentralised exchanges or offshore platforms.

Technical indicators suggest that ONDO may still have room to grow. The MACD on the 3-hour chart recently showed a bullish crossover, and the Chaikin Money Flow (CMF) indicates increased accumulation of the token. 

Analysts are now watching key resistance levels. A breakout above $1.60 could pave the way for a move toward the psychological milestone of $2.

This week’s developments paint a complex picture for the crypto market. On one hand, the SEC’s pause on Bitwise’s ETF approval reminds everyone that regulation remains a moving target. 

Even after receiving approval, fund managers are finding that success is not guaranteed. The lack of a standardised framework continues to frustrate those hoping to bring crypto products into traditional investment spaces.

On the other hand, market momentum continues to build. The ONDO ETF filing shows that firms are still pushing ahead with new ideas. Major financial players remain keen to package DeFi and RWA tokens for institutional investors. 

The growing interest in tokens like ONDO – backed by real-world use cases and strong partnerships – suggests that crypto is becoming more than just a speculative bet.