Key Takeaways
- The Commission’s orders also advance several related developments, including approvals for mixed BTC-ETH ETPs, listed and FLEX options on Bitcoin ETFs, and an increase in position limits on Bitcoin ETF options to 250,000 contracts.
- By permitting in-kind mechanisms, the SEC is bringing crypto-based ETPs in line with traditional commodity ETFs
The U.S. Securities and Exchange Commission (SEC) has voted to allow in-kind creation and redemption for crypto exchange-traded products (ETPs), enabling authorized participants to exchange shares directly for Bitcoin and Ether instead of cash.
The decision marks a significant shift from the previous cash-only model used for spot Bitcoin and Ethereum ETPs. By permitting in-kind mechanisms, the SEC is bringing crypto-based ETPs in line with traditional commodity ETFs. Authorized participants can now deliver or receive Bitcoin and Ether directly when creating or redeeming shares, a move expected to lower costs and improve tax efficiency for both issuers and investors.
“It’s a new day at the SEC,” said Chairman Paul S. Atkins following the approval. “A key priority of my chairmanship is developing a fit-for-purpose regulatory framework for crypto asset markets. Investors will benefit from these approvals, as they will make these products less costly and more efficient.”
The Commission’s orders also advance several related developments, including approvals for mixed BTC-ETH ETPs, listed and FLEX options on Bitcoin ETFs, and an increase in position limits on Bitcoin ETF options to 250,000 contracts.
Jamie Selway, Director of the Division of Trading and Markets at the SEC, called the decision “an important development for the growing marketplace for crypto-based ETPs.” He added, “In-kind creation and redemption provide flexibility and cost savings to ETP issuers, authorized participants, and investors, resulting in a more efficient market.”
The approvals received a positive reaction from market observers. Bloomberg ETF analyst Eric Balchunas described the orders as a sign of an accelerating wave of crypto ETF approvals. He said more approvals could arrive soon. Fellow Bloomberg analyst James Seyffart noted the precedent set for future altcoin ETPs, predicting that they would likely offer in-kind mechanisms from inception.
The SEC’s latest move underscores a broader policy shift. Atkins said the decision “aligns with the standard practices for similar ETPs” and reflects the Commission’s ongoing effort to “build a rational regulatory framework for crypto, leading to a deeper and more dynamic market, which will benefit all American investors.”
