The U.S. Securities and Exchange Commission (SEC) has granted approval for in-kind transactions across spot Bitcoin and Ethereum exchange-traded funds (ETFs), a move set to significantly enhance operational efficiency and reduce costs.
This approval allows authorized participants (APs) such as major financial institutions to directly exchange the underlying cryptocurrency for ETF shares. The method eliminates the need for cash conversions during creation and redemption processes.
The shift to in-kind transactions is expected to substantially decrease transaction fees and minimize tracking errors between ETF shares and the net asset value (NAV) of the cryptocurrency holdings. This cost reduction provides a clear value proposition for investors.
Major financial firms, including BlackRock and Jane Street, are anticipated to actively utilize this in-kind model. Their participation is forecast to deepen market liquidity and enhance overall market depth for these cryptocurrency ETFs.
The SEC’s decision brings crypto ETF operational mechanics closer into alignment with established commodity market practices. This alignment improves the financial infrastructure surrounding crypto investment vehicles.
SEC Chairman Paul S. Atkins emphasized the importance of developing a tailored regulatory framework for cryptocurrency assets. The approval demonstrates a flexible approach aimed at generating cost savings for investors and institutions navigating the crypto ETF space.
This regulatory action signals a potential shift towards greater institutional efficiency within the cryptocurrency market. The streamlined processes could encourage broader institutional participation and potentially increase on-chain liquidity.