The U.S. Securities and Exchange Commission (SEC) has approved significant regulatory changes for spot Bitcoin and Ethereum exchange-traded funds (ETFs), enhancing flexibility and integration for cryptocurrency investment vehicles.
Key among the approvals is the authorization of in-kind redemptions for spot Bitcoin and Ethereum ETFs. This mechanism allows authorized participants to directly exchange ETF shares for the underlying cryptocurrencies, mirroring the redemption practices established for commodity-based exchange-traded products (ETPs) like gold.
Additionally, the SEC has expanded options trading capabilities, granting approval for options trading on select spot Bitcoin ETFs. To encourage market liquidity, the regulator also substantially increased position limits for these Bitcoin ETF options, raising the cap from 25,000 to 250,000 contracts.
The adoption of in-kind redemptions is anticipated to reduce transaction costs by eliminating the need for cash settlements and subsequent crypto purchases or sales by the ETF issuer. The broader regulatory updates, including the expanded options trading, are expected to stimulate significant activity in ETF-related products and potentially pave the way for future filings for altcoin ETFs incorporating similar mechanisms.
These decisions reflect the SEC’s approach to assimilating cryptocurrency ETFs more closely with traditional commodities regulation, aligning with ongoing legislative momentum supporting structured digital asset investment products.