Nazia Saeed
- SEC has approved in-kind creation and redemption for Bitcoin and Ether ETPs, boosting market efficiency and reducing costs.
- This move aligns with the growing demand for crypto ETFs, with U.S. Bitcoin ETFs now holding over 1.298 million BTC worth $152.1 billion.
- The shift toward in-kind redemptions is part of a broader pro-crypto regulatory momentum, supported by recent legislation and growing institutional interest.
The U.S. Securities and Exchange Commission (SEC) has approved in-kind creation and redemption for cryptocurrency exchange-traded products (ETPs), offering a significant boost to the efficiency of the market. This approval allows authorized participants to exchange shares directly for the underlying crypto assets—such as Bitcoin and Ether rather than cash.
The SEC’s decision marks an important step in developing a regulatory framework tailored for crypto asset markets. SEC Chairman Paul Atkins emphasized that the new rules aim to make crypto ETPs “less costly and more efficient,” creating flexibility for ETP issuers, participants, and investors alike.
SEC ushers in new era for crypto ETPs
The approval of in-kind redemptions means that when investors redeem shares of Bitcoin or Ether ETPs, they can now receive the actual cryptocurrencies instead of cash. This method is considered more efficient, as it eliminates the need for the fund’s authorized participants to sell assets in the open market, thereby reducing transaction costs. Jamie Selway, the SEC’s director of the Division of Trading and Markets, noted that this shift would lead to cost savings for all parties involved, creating a more efficient crypto market.
This approval applies to the already approved Bitcoin and Ether funds, enabling a smoother process for fund issuers and their clients. The in-kind mechanism also avoids market price fluctuations, which may occur when selling crypto assets for cash.
Building momentum for crypto ETFs and regulatory reform
The SEC’s decision to approve in-kind creations and redemptions follows growing momentum within the industry toward more pro-crypto policies. This shift reflects an increasingly supportive stance toward crypto asset markets, particularly following the recent passage of three major crypto-related bills by Congress. These bills address critical areas such as market structure, stablecoins, and the prevention of surveillance-oriented central bank digital currencies.
At a Bitcoin Policy Institute conference last month, SEC Commissioner Hester Peirce acknowledged the growing interest in permitting in-kind redemptions for crypto ETFs. This regulatory change is in line with the broader industry trend toward embracing crypto financial products and services, further fueling demand for crypto ETFs.
Crypto ETF growth shows no signs of slowing
In light of these developments, demand for crypto exchange-traded funds (ETFs) continues to rise. Recent data reveals that U.S. spot Bitcoin ETFs recorded a 12-day streak of inflows, totaling $6.6 billion in assets. These funds now collectively hold more than 1.298 million BTC, valued at approximately $152.1 billion, according to Bitbo data. Similarly, Ether ETFs are also gaining traction, with BlackRock’s iShares Ethereum ETF surpassing $10 billion in assets in just 251 days—making it the third-fastest fund to reach that milestone.
