The US Securities and Exchange Commission (SEC) has approved in-kind creation and redemption for cryptocurrency exchange-traded products (ETPs), giving authorized representatives the ability to exchange shares directly for the underlying crypto assets instead of cash.
In a Tuesday announcement, the securities regulator stated that approved Bitcoin (BTC) and Ether (ETH) funds will be permitted to create and redeem shares on an in-kind basis.
“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,” SEC Chairman Paul Atkins said in a statement.
Atkins said the new rules will make crypto ETPs “less costly and more efficient.”
“In-kind creation and redemption provide flexibility and cost savings to ETP issuers, authorized participants, and investors, resulting in a more efficient market,” said Jamie Selway, director of the Division of Trading and Markets at the SEC.
In the context of the already approved spot crypto exchange-traded funds (ETFs), in-kind redemptions allow investors to receive the underlying assets, such as Bitcoin or Ether, instead of cash when redeeming shares. This method is generally considered more efficient, as it enables the fund’s authorized participants to avoid selling the assets on the market, potentially reducing transaction costs.
Related: SEC delays in-kind redemption decision for Bitwise crypto ETFs
Regulatory momentum builds around crypto ETFs and policy reform
When the SEC approved spot Bitcoin and Ether ETFs in 2024, it only allowed cash redemptions, withholding approval for in-kind creations and redemptions. Since then, momentum has steadily shifted toward embracing in-kind mechanisms.
At the Bitcoin Policy Institute conference last month, SEC Commissioner Hester Peirce acknowledged the growing interest in permitting in-kind redemptions.
This shift reflects a broader industry trend toward more pro-crypto policy, largely driven by the Trump administration’s commitment to supporting the sector’s growth. The movement gained further traction earlier this month when Congress passed three significant crypto-related bills addressing market structure, stablecoins and the prevention of a surveillance-oriented central bank digital currency.
Amid the broader pro-industry policy shift, demand for crypto ETFs continues to grow. As Cointelegraph reported, US spot Bitcoin ETFs recently recorded a 12-day streak of inflows, bringing in $6.6 billion in assets.
Collectively, US Bitcoin ETFs now hold more than 1.298 million BTC, valued at approximately $152.1 billion, according to Bitbo data.
Momentum is also building around Ether ETFs. BlackRock’s iShares Ethereum ETF recently surpassed $10 billion in assets in just 251 days, making it the third-fastest fund to reach that milestone.
Related: Former SEC official joins Veda as General Counsel amid DeFi expansion
