SEC Approves In-Kind Redemption for Bitcoin and Ethereum ETPs

• SEC authorises in-kind redemption for Bitcoin and Ethereum ETPs, a major crypto regulatory pivot.
• The change impacts products from major issuers like BlackRock, Fidelity, VanEck, and others.
• SEC Chairman Paul Atkins supports building a tailored crypto regulatory framework.

In a significant regulatory pivot, the US Securities and Exchange Commission (SEC) has authorised in-kind creation and redemption for all spot Bitcoin and Ethereum exchange-traded products (ETPs). Authorised participants can now exchange ETP shares for the underlying crypto assets rather than cash.

This adjustment applies to ETPs listed on exchanges such as Nasdaq, NYSE Arca, and Cboe BZX, including products offered by BlackRock, Fidelity, Franklin Templeton, Ark21, and VanEck. The decision comes after extended pressure from issuers for a more streamlined process.

The in-kind process, now approved, allows ETP shares to be created or redeemed using Bitcoin or Ether directly. This eliminates the need for immediate asset liquidation, reducing transaction costs and improving tracking efficiency.

Related: All Altcoins Will Go to Zero, Says Bitcoin-Bull Adam Back

Advertisement

Paul S. Atkins, who took over as SEC Chairman earlier this year, hailed the move as part of his agenda to develop a fit-for-purpose crypto regulatory framework. He stated that the changes would help investors by making crypto ETPs less costly and more efficient.

Previously, the SEC only permitted cash-based redemptions for crypto ETPs, requiring fund managers to sell crypto assets before issuing cash to investors a system criticised as inefficient and costly.

Todays approvals continue to build a rational regulatory framework for crypto, leading to a deeper and more dynamic market, which will benefit all American investors. This decision aligns with the standard practices for similar ETPs.

Additionally, the SEC raised the limits on options positions for BlackRocks iShares Bitcoin Trust, enabling institutional traders to hold larger positions in the product. This change indicates increased confidence in the stability of crypto ETPs and is expected to bolster hedging and speculative strategies.

Jamie Selway of the SECs Division of Trading and Markets noted that the decision was a crucial next step in the growing crypto ETP space.

In-kind creation and redemption provide flexibility and cost savings to ETP issuers, authorised participants, and investors, resulting in a more efficient market.

Market analysts, such as Bloombergs James Seyffart, believe the shift wont noticeably affect how ETPs currently trade but is an important alignment with broader ETP practices.

This move reflects a broader pro-industry stance as momentum builds for crypto ETP adoption in the US.

Advertisement

Related: ETH Targets $3.5K as U.S. Spot ETF Momentum BuildsATH Next?