SEC Approves In-Kind Redemptions for Bitcoin, Ethereum ETFs

The U.S. Securities and Exchange Commission (SEC) has approved in-kind redemptions for Bitcoin and Ethereum exchange-traded products (ETPs), allowing authorized participants to exchange ETF shares directly for the underlying cryptocurrencies rather than cash. This regulatory shift aligns crypto ETFs with traditional commodity funds like gold-backed products, streamlining transactions, reducing costs, and enhancing market efficiency. SEC Chairman Paul Atkins emphasized the significance of this move as part of a broader effort to develop a regulatory framework better suited to digital assets, while SEC officials highlighted the increased flexibility and cost savings for investors and intermediaries. The approval is expected to increase liquidity, attract institutional investors, and expand derivatives markets, including options trading for Bitcoin ETFs with substantially raised position limits. Industry analysts view the SEC's evolving stance as a positive step toward greater institutional adoption and improved market dynamics for crypto ETPs, with expectations that future altcoin ETFs will incorporate similar in-kind mechanisms from inception. This change marks a pivotal moment in the maturation of cryptocurrency markets under U.S. financial law.