SEC Takes Aim at Bitcoin ETF’s Core Mechanism—What It Means for Crypto’s Wall Street Dreams

The SEC just fired a warning shot across the bow of Bitcoin ETFs—and the target isn’t what you’d expect.

Regulators aren’t just questioning the product’s existence (though let’s be honest, they’d love to). They’re zeroing in on the creation/redemption process that keeps these funds tethered to Bitcoin’s price. Translation: They’re coming for the plumbing.

Why this matters: Without this mechanism, ETFs become expensive guessing games rather than precise crypto trackers. The SEC knows it—and so do the Wall Street suits suddenly sweating through their custom shirts.

One cynical take: Nothing unites regulators and bankers faster than the chance to complicate something simple. Bitcoin was born to bypass middlemen. Now it’s begging them for approval. How’s that for irony?

In Brief

• WisdomTree Bitcoin Fund wants to authorize in-kind creations, in bitcoin, without going through cash.
• The SEC opens a public consultation to assess the risks and benefits of this transformation.
• Other crypto ETFs, notably those linked to Ethereum and BlackRock, hope for the same relaxation.
• The public debate could sustainably influence the US regulatory strategy on crypto ETFs.

The Debate on In-Kind Creations Shakes Bitcoin ETFs

On June 2, the SEC openedon a proposal from the Cboe BZX Exchange. This aims to, a spot bitcoin ETF approved in January 2024. The issue? Allowing investors to, that is,.

According to the SEC:

The institution of procedures is appropriate […] given the legal and political stakes involved.

This careful wording does not hide. Meanwhile, similar proposals remain pending: the VanEck ethereum Trust, the VanEck Bitcoin Trust, and the closely watched BlackRock iShares Bitcoin Trust.

All demand the same flexibility:. But to take this step,. It asks the public to comment on the consistency of these proposals with Section 6(b)(5) of the Securities Exchange Act. This section requiresand prevent market manipulation. For now, no green light. But the lines are moving.

A More Strategic SEC, an Evolving Image

If the SEC grants approval, it will be a symbolic and operational turning point. Authorizing in-kind creations and redemptions would enhance the liquidity of crypto ETFs. It would allow institutional investors to. The gesture would signalincluding those linked to Ethereum, Bitcoin, or other major blockchains.

In its release, the SEC invites “interested persons to submit comments on the proposed rule change“. This participatory approach gives the SEC a new face: that of.

Key points to remember:

• WisdomTree Bitcoin Fund wants to switch to “in-kind” creations and redemptions;
• The SEC has not yet approved, but actively consults the public;
• Several crypto ETFs linked to Ethereum and Bitcoin are awaiting the same treatment;
• The goal is to prevent manipulation and protect investors;
• Adoption of this measure would mark a strategic shift for the SEC.

This change of tone does not make it a blind crypto advocate. But it indicates a repositioning strategy. No longer frozen in the face of innovations.

The SEC now plays the openness card. But it does not intend to rush things. Proof of this, it has just postponed until this summer the approval of many major crypto ETFs. Innovation yes, but in carefully measured steps.

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