The Securities and Exchange Commission (SEC) recently made a groundbreaking decision to approve orders that allow authorized participants to create and redeem shares of spot Bitcoin (BTC) and Ethereum (ETH) exchange‑traded products (ETP) in kind. This move is aimed at aligning crypto funds with standard practice in commodity‑based ETPs, reducing costs, and improving market efficiency.
Chairman Paul Atkins expressed his enthusiasm for the approval, stating, “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, the head of the Division of Trading and Markets, also praised the decision, calling it “an important development” that provides flexibility for issuers and authorized participants. The SEC further advanced a series 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 for listed options on certain BTC ETPs.
Additionally, the SEC issued scheduling orders seeking feedback on delegated approvals for two large‑cap crypto‑based ETPs, following amendments made by Cboe to these products on July 22, which were viewed positively by ETF analysts.
One key aspect of the SEC’s decision is the introduction of in‑kind creation and redemption for ETF shares. Authorized participants (APs), which are typically large trading firms and banks, can now deliver or receive BTC or ETH when creating or redeeming shares. This structural shift allows APs to move crypto directly, reducing frictions, tightening spreads, and managing baskets more efficiently, especially in volatile markets.
Bloomberg’s Eric Balchunas highlighted the significance of the SEC’s move, stating that the agency “just approved in‑kind creation/redemption for all spot bitcoin and ether ETFs,” and suggesting that more decisions could be on the horizon, potentially by early fall. Analysts like James Seyffart have also predicted that future altcoin ETFs will likely launch with in‑kind creation and redemption, signaling a positive direction for the industry.
In conclusion, the SEC’s approval of in‑kind creation and redemption for spot Bitcoin and Ethereum ETPs represents a significant step towards streamlining the crypto asset market and making it more accessible and efficient for investors. This move sets the stage for further developments and innovations in the ETF space, paving the way for a more robust and dynamic market ecosystem.