The U.S. Securities and Exchange Commission (SEC) has approved in-kind creation and redemption processes for all spot Bitcoin and Ethereum exchange-traded funds (ETFs), permitting authorized participants to directly exchange shares for underlying digital assets. This structural shift aligns crypto ETFs with traditional fund mechanics and replaces less efficient cash-based models previously employed.
Major exchanges including Nasdaq, NYSE Arca, and Cboe BZX received expedited approvals to implement this model across their crypto ETF offerings. The in-kind framework enables ETF issuers to seamlessly adjust share supply in response to market demand without requiring continuous secondary market purchases of cryptocurrencies.
Transaction costs for institutional participants are expected to decline significantly under the new model, which minimizes taxable events and reduces cash management friction during share creation and redemption cycles. Enhanced liquidity management further allows funds to scale operations while lessening market impact during volume fluctuations.
SEC leadership, particularly Chair Paul Atkins and Commissioner Hester Peirce, spearheaded this regulatory pivot toward a market-accommodating approach. Industry analysts view the decision as recognition of cryptocurrency ETFs’ institutional maturation.
The approval establishes a benchmark for future digital asset products, with expectations that forthcoming altcoin ETF filings will incorporate in-kind models by design. This development signals broader regulatory confidence in cryptocurrency frameworks and paves the way for expanded institutional adoption.