SEC May Expand Bitcoin ETF Access with In-Kind Redemptions and Increased Derivatives Limits

Key Points

1. The SEC authorized in-kind redemptions for spot Bitcoin and Ethereum ETFs, mirroring practices used by gold exchange-traded products (ETPs).

2. The SEC also approved options trading on select spot Bitcoin ETFs and increased position limits for Bitcoin ETF options from 25,000 to 250,000 contracts to encourage liquidity.

3. In-kind redemptions reduce transaction costs by allowing authorized participants to exchange ETF shares directly for cryptocurrencies.

4. The regulatory updates are expected to trigger a surge in ETF-related trading products and may lead to future altcoin ETF filings with similar provisions.

5. The SEC's decision aligns with legislative momentum supporting digital assets, treating crypto ETFs more like traditional commodities.