The U.S. Securities and Exchange Commission approved a long-awaited change to how cryptocurrency exchange-traded products (ETPs) are managed, giving the green light for in-kind creations and redemptions.
The decision allows authorized participants to exchange shares of crypto funds directly for the underlying digital assets, rather than going through cash settlements.
Tuesday’s ruling covers a range of products, including spot bitcoin and ether ETFs, and options tied to spot bitcoin funds. The SEC also approved proposals from major exchanges — Nasdaq, NYSE Arca, and Cboe — to support in-kind processes for funds from BlackRock, Ark 21Shares, Fidelity, VanEck, and others.
“It’s a new day at the SEC,” said Chairman Paul Atkins in a statement. “Today’s approvals continue to build a rational regulatory framework for crypto, leading to a deeper and more dynamic market.”
ETF issuers have pushed for in-kind redemptions for months, arguing that direct asset transfers reduce costs and improve efficiency. The SEC initially required cash redemptions when it approved the first round of spot bitcoin ETFs, forcing firms to sell holdings and return the proceeds in dollars.
“This change brings crypto ETPs in line with the way most traditional ETFs already operate,” said Bloomberg ETF analyst James Seyffart, who noted the shift could help pave the way for future products tied to other cryptocurrencies.
The move comes amid growing demand for crypto investment tools that operate under familiar financial structures. While the change won’t affect everyday retail investors directly, it could make these products more attractive to institutions and market makers — the so-called authorized participants — who play a key role in ETF liquidity.
Jamie Selway, head of the SEC’s Division of Trading and Markets, said in-kind mechanisms offer “flexibility and cost savings” across the board, from issuers to end users.
Ripple effects from the decision are already being felt. Seyffart said that upcoming ETF filings tied to altcoins will likely be structured with in-kind redemption from the start.
