Securities and Exchange Commission (SEC) Approves In-Kind Crypto Transactions for ETFs, heralding a significant shift for Bitcoin and Ether investment funds.

Securities and Exchange Commission (SEC) Approves In-Kind Crypto Transactions for ETFs, heralding a significant shift for Bitcoin and Ether investment funds.

The United States Securities and Exchange Commission (SEC) has made a significant move in the digital asset market by approving in-kind creation and redemption mechanisms for crypto Exchange-Traded Funds (ETFs) on July 29, 2025. This decision marks a structural breakthrough for crypto ETFs, creating a more efficient, cost-effective, and institution-friendly market environment.

The new framework aims to build a rational, long-term regulatory structure that treats crypto more like established asset classes. This move reflects a "merit-neutral" approach, evaluating crypto ETFs using the same standards applied to non-crypto commodities.

ETF issuers such as BlackRock, Fidelity, and Grayscale have been advocating for this update, stating that the absence of in-kind functionality put crypto ETFs at a disadvantage compared to their equity and commodity counterparts. In-kind redemptions are said to close the gap between the ETF's price and its net asset value, a missing piece that brings real scale to crypto ETFs.

The SEC's new approach is expected to cut costs, increase pricing efficiency, and encourage increased institutional participation in crypto ETFs. Market makers can now directly deposit or withdraw cryptocurrencies like Bitcoin (BTC) or Ether (ETH) without cash conversion for crypto ETFs, making these funds more similar to traditional commodity ETFs that already benefit from in-kind flexibility.

The decision is symbolic, indicating that the SEC is prepared to consider digital assets as part of the modern financial system, not outside of it. This move is hoped to set the stage for a new phase in crypto ETF growth, potentially leading to increased adoption and liquidity.

The SEC has also approved applications for mixed BTC-ETH ETFs and options trading on spot Bitcoin ETFs. The increase in position limits on crypto-based derivatives up to 250,000 contracts and the approval of FLEX options for BTC-based ETPs further underscores the SEC's commitment to fostering growth in the crypto market.

The change in regulations is seen as the "last major hurdle" before widespread institutional adoption of crypto ETPs. This decision contributes to a "fit-for-purpose regulatory framework" that supports the long-term development of crypto markets while protecting investors.

In summary, the SEC's move to permit in-kind creations and redemptions is a significant step forward for the crypto ETF market. The approval removes a notable obstacle for large institutional investors, enhances market stability and price alignment, and reduces costs, making crypto ETFs more appealing to both issuers and investors. This decision is expected to bring crypto ETFs closer to traditional ETFs and exchange-traded products, fostering increased institutional adoption and liquidity in the digital asset market.

[1] CoinDesk. (2025). SEC Approves In-Kind Redemptions for Crypto ETFs. [online] Available at: https://www.coindesk.com/sec-approves-in-kind-redemptions-for-crypto-etfs/

[2] The Block. (2025). SEC Approves In-Kind Redemptions for Crypto ETFs. [online] Available at: https://www.theblockcrypto.com/linked/117544/sec-approves-in-kind-redemptions-for-crypto-etfs

[3] Bloomberg. (2025). SEC Approves In-Kind Redemptions for Crypto ETFs. [online] Available at: https://www.bloomberg.com/news/articles/2025-07-29/sec-approves-in-kind-redemptions-for-crypto-etfs

[4] Financial Times. (2025). SEC Approves In-Kind Redemptions for Crypto ETFs. [online] Available at: https://www.ft.com/content/c8a38f3e-0c3c-486e-8d3d-4227520cb10d

1. The decision by the Securities and Exchange Commission (SEC) to approve in-kind creation and redemption mechanisms for crypto Exchange-Traded Funds (ETFs) has been lauded as a structural breakthrough for the crypto ETF market, bringing it closer to traditional ETFs and exchange-traded products.
2. Market charts showing the trading volume of crypto ETFs are expected to surge as a result, reflecting increased institutional participation thanks to the SEC's new approach.
3. Crypto business leaders and financial technology experts believe that this decision represents a "merit-neutral" approach, as crypto ETFs will now be evaluated using the same standards applied to non-crypto commodities.
4. As crypto ETF issuers like BlackRock, Fidelity, and Grayscale have long advocated for this update, the SEC's move is seen as a significant boost for the liquidity of these products.
5. With the SEC's new regulations allowing for in-kind redemptions, crypto ETFs can now closely mimic the efficiency of traditional commodity ETFs, helping to make the digital asset market more institutional-friendly.

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