Bitcoin News Today: Five Bitcoin ETF Providers Push In-Kind Models to Cut Costs, Align with Global Standards

The Bitcoin ETF landscape is undergoing a significant structural shift as major industry players push for a transition from cash-only mechanisms to in-kind creation and redemption models. In late July 2025, five leading ETF providers—including Fidelity, Ark 21Shares, Invesco Galaxy, VanEck, and WisdomTree—submitted coordinated amendments to the SEC and Cboe BZX Exchange to rework their spot Bitcoin and Ethereum ETF structures [1]. These filings aim to align U.S. crypto ETFs with international practices, such as those in China Hong Kong, where similar in-kind models already exist [1]. The proposed changes, now under public comment, could reduce trading costs, improve tax efficiency, and enhance price alignment with the underlying spot market [1].

The SEC’s evolving regulatory stance has been pivotal in enabling this shift. On July 7, the agency released a 12-page supervisory framework outlining expectations for custody, disclosures, and risk management in crypto-linked ETFs [1]. This document also proposed streamlining the approval process by replacing case-by-case exemptions with predefined templates, potentially cutting approval timelines from 240 to 75 days [1]. Analysts attribute the SEC’s flexibility to growing confidence in the industry’s ability to address prior concerns, such as money laundering and custody standards [2]. James Seyffart of Bloomberg noted that the timing of the filings suggests regulators and issuers are converging on shared technical standards and risk controls [1].

In-kind structures differ fundamentally from the current cash-based model. Under the existing system, ETF issuers must execute market orders to buy or sell Bitcoin when creating or redeeming shares, introducing execution risks, slippage, and delays [1]. By contrast, in-kind mechanisms allow authorized participants (APs) to directly transfer crypto assets to or from the ETF, eliminating intermediaries and reducing operational friction [1]. This approach mirrors traditional equity and commodity ETFs and offers key advantages: tax efficiency for funds, tighter arbitrage alignment with spot prices, and smoother execution during volatile periods [1].

The benefits of in-kind models extend beyond operational efficiency. For tax purposes, in-kind redemptions prevent ETFs from triggering capital gains distributions by avoiding internal asset sales. This preserves net asset value (NAV) stability and benefits long-term investors [1]. Additionally, the streamlined process strengthens arbitrage mechanisms, ensuring ETF prices more closely track Bitcoin’s real-time value [1]. These improvements could make crypto ETFs more attractive to institutional investors, who require robust infrastructure for large-scale allocations and hedging strategies [1].

While the shift signals progress, challenges remain. Applications from BlackRock, Bitwise, and others are still pending as the SEC evaluates custody protocols and anti-money laundering compliance [1]. Bryan Armour of Morningstar emphasized that the regulator’s cautious pace reflects a commitment to investor protection before enabling direct crypto transfers [1]. Deloitte highlighted that earlier in-kind proposals were revised under regulatory pressure, suggesting that current resubmissions may indicate prior objections have been addressed [1].

The approval of in-kind creation and redemption could mark a turning point for U.S. crypto ETFs, bridging the gap between emerging markets and traditional finance. By aligning with global standards, these funds may enhance market transparency, reduce volatility, and foster broader institutional participation [1]. As the industry and regulators continue refining the framework, the success of this transition will likely shape the future trajectory of crypto asset integration into mainstream capital markets.

Sources:

[1] [Bitcoin ETF design enters transition phase as industry rethinks operational foundations](https://coinmarketcap.com/community/articles/68828885747ff0612d594b07/)

[2] [James Seyffart tweet on July 22, 2025](https://twitter.com/JSeyff/status/Xw0Z7SbYwj)