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- The SEC will decide by September 8 on a major rule change affecting Bitwise Bitcoin and Ethereum ETFs.
- The rule would allow in-kind creation and redemption, possibly improving fund efficiency.
- Bitwise has launched daily proof of reserves verification by a third-party accounting firm.
The U.S. Securities and Exchange Commission (SEC) has extended the review period for a proposed change to rules surrounding the Bitwise Bitcoin ETF Trust and Bitwise Ethereum ETF. Originally filed by NYSE Arca on May 21, 2025, the rule change would allow the funds to use in-kind creation and redemption mechanisms, replacing the current cash-only model.
The Exchange later filed two amendments, on June 4 and June 30, respectively, which, as a whole, substituted the original proposal. These amendments reflect attempts at refining ETF structure as well as clarity of regulation. The SEC made the modified filing available for comment to the public on July 14, initiating a 45-day review period. The period was to end July 25.
However, the Commission has now resolved to provide the review period through September 8. It explained that it required more time to review the proposal in depth. The longer period will give the SEC time to review the implications and make a determination as to whether the amended mechanism fosters investor protection and stability in the market.
Rule Change Could Transform Bitwise ETF Operations
When approved, the rule would be a major shift in the workings of the two ETFs. In-kind creations and redemptions allow the physical swapping of crypto assets like blockchain-based currencies Bitcoin and Ether for shares of the ETFs. The process minimizes the effect of taxes and maintains low trading costs. It is standard in traditional ETFs holding physical stocks or commodities.
A move away from a cash system would make the business more streamlined. It would also make the fund more appealing to institutions, as it eliminates the frictions of entering or exiting ETF positions. Should the digital asset ETFs continue to gain momentum, the move can be replicated by other fund issuers.
Rule proposal fits the bigger trends as crypto-related financial products seek to converge with the existing ETF practice. The iterative amendments by NYSE Arca show the issuers are actively negotiating with regulators to balance compliance and alleviate concerns.
Bitwise Introduces Proof of Reserves for ETFs
While it waits for regulatory review, Bitwise has in front of it a proactive step. Yesterday, July 15, the Bitwise company released a new Proof of Reserves system for the ETFs. The Network Firm, a U.S. certified accounting firm, will be verifying the holdings of the bitcoin as well as the ether daily. The company will be reconciling these assets to the shares outstanding in total.
Investors can now track balance updates via the website of each fund. Bitwise will also release daily CPA-confirmed reports, which will verify assets as well as liabilities. These steps aim at increasing investor confidence as well as improving accountability in a sector yet to be viewed favorably by the mainstream finance.
By replacing its use of the public wallet list for third-party verification, Bitwise signals a move to standardized transparency that can be attractive to bigger markets. Down the road, If approved, the rule would see Bitwise ETFs operate more efficiently by trading crypto for shares rather than cash. This would likely be attractive to bigger investors and precipitate other crypto funds to make the same move.
Related Reading: Bitcoin Next Move: Will It Surpass $124K or Face a Reversal?
