Breaking: SEC Approves In-Kind Redemptions in Ethereum and Bitcoin ETFs

Per a recent statement released by the United States SEC, spot Ethereum and Bitcoin ETFs will now be able to perform in-kind redemptions for their clients. This move represents a change from the previous requirement that limited these transactions to cash only.

New SEC Regulation Puts Bitcoin ETFs on the Same Standards as Gold ETPs

Based on the official press release from the SEC, authorized participants now have the regulator’s approval to create and redeem ETP shares directly with real Bitcoin or Ethereum. The SEC stated that this change brings Ethereum and Bitcoin ETPs in line with existing rules for commodity-based ETPs such as those backed by gold.

SEC Chairman Paul S. Atkins said in an X post that the orders reflect an effort to implement a regulatory structure for crypto asset markets. He stated that the new process is designed to reduce costs and improve efficiency for investors and market participants.

In the press release, Jamie Selway, Director of the Division of Trading and Markets, said the approval of in-kind processes for Ethereum and Bitcoin ETFs offers operational flexibility and cost savings. He described the decision as a development for the crypto ETP marketplace. Earlier, the US SEC acknowledged Nasdaq’s filing for staking functionalities in BlackRock’s spot Ethereum ETF.

SEC Expands Crypto ETP Rules With Options, Position Limits, and Dual Asset Approvals

In addition to the approval of in-kind redemptions, the SEC also voted on other related orders. These included approvals for options on certain spot Bitcoin ETFs, and FLEX options on shares of Bitcoin-based ETPs.

The US regulator’s approval included a change in the position limits for Bitcoin ETF options. This represents a jump from 25,000 contracts to 250,000 contracts, representing a 10x increase. These changes are expected to boost the derivatives market for Bitcoin ETPs significantly.

Bloomberg analyst Eric Balchunas highlighted the impact in an X post. He quoted an issuer who said, “This is huge… and will create explosion of option-based Bitcoin ETFs.”

According to the press release, these updates are effective immediately. The ruling by the SEC is a further commitment to its recent dynamic perspective towards digital assets, particularly after the signing of Genius Act by President Trump. Furthermore, the new step contributes to the integration of crypto into regulated markets and parity with current ETP practices.

In a post on X, Bloomberg analyst James Seyffart noted that upcoming approvals for altcoin ETFs will also likely include in-kind provisions from the outset. Seyffart called the shift “more movement in the right direction.”

Meanwhile, Nate Geraci, President of The ETF Store, highlighted the SEC’s forward-looking stance. He also quoted the SEC Chairman stating, “It’s a new day at the SEC, and a key priority of my chairmanship is developing a fit-for-purpose regulatory framework for crypto asset markets.”