SEC Approves In-Kind Creation and Redemption for Bitcoin and Ethereum ETFs

The U.S. Securities and Exchange Commission (SEC) has approved in-kind creation and redemption processes for all spot Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs), a move widely seen as a breakthrough for institutional crypto investing. This decision allows authorized participants—typically large financial institutions—to create and redeem ETF shares directly using BTC or ETH instead of cash, streamlining operations and reducing conversion costs.

The approval represents the first major crypto-friendly action under new SEC Chair Paul Atkins, a former commissioner known for advocating market-friendly policies. “It’s a new day at the SEC,” Atkins said, highlighting plans to create a regulatory framework better suited for digital assets.

Previously, spot Bitcoin ETFs launched in January 2024 were limited to cash-based transactions, which added complexity for institutional market makers. BlackRock first requested approval for in-kind transactions for its iShares Bitcoin Trust (IBIT), followed by Fidelity and Ark Invest.

In addition to this policy shift, the SEC raised position limits for options trading on IBIT, enabling traders to hold larger options positions and signaling growing confidence in the Bitcoin ETF market’s liquidity and maturity. This change is expected to enhance arbitrage and hedging strategies, potentially boosting institutional participation in both Bitcoin and Ethereum ETFs.

By aligning crypto ETFs more closely with traditional market structures, the SEC’s decision could accelerate adoption and attract broader institutional capital, marking a pivotal moment for the digital asset industry.