SEC approves in‑kind redemptions for spot Bitcoin and Ethereum ETFs

The Securities and Exchange Commission (SEC) approved orders allowing authorized participants to create and redeem shares of spot Bitcoin (BTC) and Ethereum (ETH) exchange‑traded products (ETP) in kind.

According to a July 29 statement, the agency framed the move as aligning crypto funds with standard practice in commodity‑based ETPs. Additionally, it said the change should reduce costs and improve market efficiency.

Chairman Paul Atkins said in a statement:

“It’s a new day at the SEC, and 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.” 

Jamie Selway, who leads the Division of Trading and Markets, called the decision “an important development” that adds flexibility for issuers and authorized participants.

The Commission also advanced a broader slate of measures by approving exchange applications to list a mixed spot Bitcoin‑and‑Ether ETP, options on certain spot Bitcoin ETPs, FLEX options on shares of some BTC‑based ETPs, and an increase in position limits up to the generic 250,000‑contract cap for listed options on certain BTC ETPs. 

In addition, the SEC issued scheduling orders seeking comment regarding delegated approvals for two large‑cap crypto‑based ETPs.

The move follows Cboe amendments to these products on July 22, deemed by ETF analysts as a positive sign.

What in‑kind means

Under the new orders, authorized participants (APs) can deliver or receive BTC or ETH when creating or redeeming ETF shares. APs are typically large trading firms and banks. 

For most investors, trading will look the same, as the shares will still change hands on exchanges and track net asset value closely. As a result, the shift is structural, allowing APs to move crypto directly rather than sourcing or unwinding large cash positions. 

This enables funds to lower frictions, tighten spreads, and manage baskets more efficiently, especially in volatile markets.

Bloomberg’s Eric Balchunas wrote on X that the agency “just approved in‑kind creation/redemption for all spot bitcoin and ether ETFs,” adding that an “order granting accelerated approval” signals more decisions to come, potentially by early fall. 

James Seyffart predicted future altcoin ETFs would likely launch with in‑kind from the start, which he called “more movement in the right direction.”

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