The U.S. Securities and Exchange Commission (SEC) has implemented a rule change permitting cryptocurrency exchange-traded funds (ETFs) to utilize in-kind creations and redemptions for Bitcoin and Ether.
This significant regulatory update enables authorized participants to create and redeem ETF shares directly using the underlying cryptocurrencies themselves.
The operational shift aims to enhance cost efficiency, streamline operations for ETF providers, and better align crypto ETF mechanics with those of traditional exchange-traded products.
Bitwise Asset Management has emerged as a key early adopter of this new in-kind creation/redemption structure for its Bitcoin and Ether ETF offerings.
Importantly, the SEC rule change does not alter the experience for retail investors trading ETF shares on exchanges; they cannot directly exchange ETF shares for Bitcoin or Ether.
The industry impact is underscored by data showing U.S. Bitcoin ETFs collectively hold 1,299,401 BTC, representing approximately 6.18% of the total Bitcoin supply.
The largest holder within this group remains the iShares Bitcoin Trust (IBIT).