Major US spot Bitcoin and Ethereum ETF providers, including Ark 21Shares, Fidelity, Invesco Galaxy, VanEck, and WisdomTree, are actively seeking regulatory approval to implement in-kind creations and redemptions.
This change would authorize participants to directly exchange actual Bitcoin (BTC) or Ethereum (ETH) for ETF shares, shifting from the current requirement of cash-based transactions established upon launch.
The US Securities and Exchange Commission (SEC) had initially mandated cash handling as the preferred method for creation and redemption activities. This approach emphasized regulatory oversight and aimed to address potential money laundering concerns associated with direct crypto handling.
If approved, the shift to in-kind transactions is primarily expected to benefit institutional investors and market makers by improving operational efficiency and reducing transaction friction. Retail investors utilizing the ETFs are unlikely to experience significant immediate changes in their interaction with the products.
This evolution mirrors the structure of traditional commodity-based exchange-traded funds, such as those tracking gold. Proponents view it as a natural progression for the maturation of the cryptocurrency ETF market.
Approval of these amendments by the SEC is considered a potential milestone. It could significantly enhance the integration of crypto ETFs within the established traditional financial framework, signaling increased institutional acceptance and operational normalization.