SEC Greenlights In-Kind Creations for Bitcoin & Crypto ETFs – A Game-Changer for Digital Asset Liquidity

The SEC just handed Wall Street's crypto-curious a golden ticket—approving in-kind creations for Bitcoin and crypto ETFs. No more clunky cash-only settlements. This is the institutional on-ramp the market’s been begging for.

Why it matters: Funds can now create shares by depositing actual Bitcoin (or other crypto) instead of cash. That means tighter spreads, lower costs, and a smoother path for big-money players to dive in.

The cynical take: After years of foot-dragging, regulators finally found a way to make ETFs palatable… just as banks finish building their crypto custody vaults. How convenient.

Bottom line: The floodgates are open. Whether this pumps prices or just lines bankers’ pockets remains to be seen—but the crypto ETF arms race just got real.

Key Takeaways

• SEC approves in-kind creation and redemption for Bitcoin and Ether ETPs, enabling direct asset exchange.
• The new rules are expected to make bitcoin ETFs less costly and more efficient for issuers and investors.
• US spot Bitcoin ETFs now hold over 1.29 million BTC, reflecting strong institutional demand.

The US Securities and Exchange Commission (SEC) has approved in-kind creation and redemption for Bitcoin and Ether exchange-traded products (ETPs), allowing authorized participants to exchange shares directly for the underlying assets rather than cash.

SEC efficiency

SEC Chairman Paul Atkins emphasized the significance of the new rules, 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.”

Jamie Selway, director of the Division of Trading and Markets at the SEC, added that these measures WOULD bring more flexibility and cost savings to ETP issuers, authorized participants, and investors, ultimately resulting in a more efficient market.

What in-kind redemptions mean

In-kind redemptions allow investors to receive the underlying assets, such as Bitcoin, rather than cash when redeeming ETF shares.

This mechanism can help authorized participants avoid selling assets on the open market, potentially reducing transaction costs and market impact.

Policy momentum

The MOVE to allow in-kind transactions comes amid a broader industry shift toward more pro-bitcoin policy.

SEC Commissioner Hester Peirce recently noted at the bitcoin Policy Institute conference that support for in-kind redemptions has been growing.

This policy development coincides with recent Congressional action on several bitcoin-related bills and continued growth in ETF demand, with US spot Bitcoin ETFs recently reporting a streak of consecutive inflows.