07.30.2025
The U.S. Securities and Exchange Commission has voted to allow authorized participants to create and redeem crypto exchange-traded product shares directly with the underlying assets, rather than cash.
Gregory Xethalis, general counsel of Multicoin Capital Management, said:
2) It actually means there is more regulatory oversight over the acquisition and disposition of crypto assets because it will be done on behalf of the regulated broker dealers (vs by the funds that are not, themselves, regulated entities; they only register their shares).
— Greg Xethalis (@xethalis) July 29, 2025
4) It also makes it harder for someone to theoretically manipulate ETP shares around the creation/redemption process. Large c/r orders can force a cash-only fund to engage in the market. Div of IM has expressed a fondness for in-kind making ETFs more resistant to manipulation.
— Greg Xethalis (@xethalis) July 29, 2025
Paul Atkins, chair of SEC, said:
I'm pleased to share the SEC approved in-kind creations and redemptions for crypto ETPs. The approvals continue to build a rational regulatory framework for crypto, leading to a deeper and more dynamic market, which will benefit all American investors. https://t.co/UbQ9pXlBpD pic.twitter.com/DX8ub16Ey3
— Paul Atkins (@SECPaulSAtkins) July 29, 2025
SEC Permits In-Kind Creations and Redemptions for Crypto ETPs
The orders approved reflect a departure from recently approved spot bitcoin and ether ETPs, which were limited to creations and redemptions on an in-cash basis.
With the approval orders, bitcoin and ether ETPs, consistent with other commodity-based ETPs approved by the Commission, will be permitted to create and redeem shares on an in-kind basis.
“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,” said SEC Chairman Paul S. Atkins. “I am pleased the Commission approved these orders permitting in-kind creations and redemptions for a host of crypto asset ETPs. Investors will benefit from these approvals, as they will make these products less costly and more efficient.”
“Today’s approvals continue to build a rational regulatory framework for crypto, leading to a deeper and more dynamic market, which will benefit all American investors. This decision aligns with the standard practices for similar ETPs.”
Jamie Selway, Director of the Division of Trading and Markets, said, “The Commission’s decision is an important development for the growing marketplace for crypto-based ETPs. In-kind creation and redemption provide flexibility and cost savings to ETP issuers, authorized participants, and investors, resulting in a more efficient market.”
The Commission also voted to approve other orders that advance a merit-neutral approach to crypto-based products, including exchange applications seeking to list and trade an ETP that would hold mixed spot bitcoin and spot ether, options on certain spot bitcoin ETPs, Flexible Exchange (FLEX) options on shares of certain BTC-based ETPs, and an increase of position limits up to the generic limits for options (up to 250,000 contracts) for listed options on certain BTC ETPs.
Additionally, the Commission issued two scheduling orders soliciting comments in support of, or in opposition to, the Division of Trading and Market’s approval, pursuant to delegated authority, of a national securities exchange’s proposals to list and trade two large cap crypto-based ETPs.
Source: SEC
Eric Balchunas, senior ETF analyst at Bloomberg, said on X: “An issuer just wrote me: “This is huge.. and will create explosion of option based bitcoin ETFs.”
Joe Consorti, head of growth at Theya (YC), a bitcoin self-custody solution, Horizon, institutional lead at The Bitcoin Layer, said:
Institutions will now be able to sell their spot ETF shares for Bitcoin, or buy spot ETF shares using Bitcoin.
This reduces the need for the ETFs to sell Bitcoin on the open market when entities cash out. They can just give them the BTC instead.
Massively bullish development. https://t.co/ttBrt5t38u
— Joe Consorti ⚡️ (@JoeConsorti) July 29, 2025
Gabor Gurbacs, founder of Pointsville, who formerly managed VanEck’s digital asset initiatives, said on X: “It’s a big deal as some of the largest firms in the world will be able to handle and accumulate physical Bitcoin. I was one of the first people on Wall Street to push for this. Very happy to see it go to through.”
Bitwise, the digital asset investment firm, said:
Yesterday, the SEC approved in-kind creations and redemptions for the Bitwise Bitcoin ETF $BITB and the Bitwise Ethereum ETF $ETHW, along with several other spot crypto ETPs.
It’s big news—and a long time coming. ⁰
What is it?
In-kind creation and redemption is a process where…— Bitwise (@BitwiseInvest) July 30, 2025
“What is it?
In-kind creation and redemption is a process where ETF shares are exchanged for the underlying assets—like bitcoin—instead of cash, helping reduce costs and improve tax efficiency.
Why it matters:
•More efficient—can streamline transactions, tighten trading spreads, and increase tax efficiency for ETPs
•Mainstream signal—brings spot crypto ETPs closer in line with traditional-asset ETPs and ETFs, which have done in-kind transactions for decades
For years, we, our partners, and others in the industry have been pushing for this change to bring investors the most efficient means of accessing crypto possible.
Another milestone in a big year for this space. Let’s go.”
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A Senior Writer at Markets Media who became a financial journalist in 2000 after working in banking for over a decade....
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