Bitcoin News Today: Major crypto ETF providers advancing in-kind creations for Bitcoin and Ethereum ETFs to benefit institutional investors.

Major cryptocurrency ETF providers are advancing regulatory filings to enable in-kind creations and redemptions for Bitcoin and Ethereum funds, a move expected to streamline operations and align these products more closely with traditional exchange-traded products (ETPs) [1]. This development, initiated by firms such as Ark 21Shares, Fidelity, Invesco Galaxy, VanEck, and WisdomTree, would allow authorized participants to exchange actual BTC or ETH for ETF shares, replacing the current cash-based model [1]. While institutional investors stand to benefit from enhanced efficiency, retail investors are likely to remain excluded due to the dominance of Wall Street firms in the in-kind redemption process [1].

The shift reflects a broader industry trend toward operational standardization. Analyst James Seyffart of Bloomberg noted that the filings signal “positive movement and likely fine-tuning happening with the SEC,” indicating regulatory progress toward approving in-kind mechanisms [1]. This transition would mirror traditional ETP structures, where physical assets underpin share issuance and redemption, potentially reducing operational friction for institutional players [1]. However, the SEC’s initial preference for cash-based redemptions—enacted to mitigate money laundering risks and limit broker-dealer exposure to Bitcoin—remains a key regulatory precedent [1].

Critically, the in-kind model would centralize Bitcoin trading activity with issuers rather than brokers, as the latter remain barred from directly handling spot Bitcoin ETFs [1]. Charles Gasparino of Fox Business News explained that the SEC’s cash-based approach “keeps broker dealers from having to use unregistered subsidiaries or third-party firms to deal with BTC,” simplifying regulatory oversight [1]. While this framework prioritizes compliance, it has historically limited liquidity and efficiency compared to in-kind mechanisms used in gold or other commodity ETFs [1].

Analysts caution that retail investors will not immediately benefit from these changes. James Seyffart emphasized that “the vast majority of people won’t even see a difference” because existing crypto ETFs already trade efficiently, and in-kind redemptions will primarily serve institutional participants with the infrastructure to manage direct crypto exchanges [1]. Retail access is expected to remain restricted to traditional brokerage platforms, where cash transactions dominate.

The regulatory trajectory underscores a balancing act between operational efficiency and risk management. While the SEC’s cautious stance on cash creations was initially seen as a compromise to secure approval, the push for in-kind mechanisms suggests a growing appetite for aligning crypto ETFs with established financial benchmarks [1]. Eric Balchunas of Bloomberg highlighted that the U.S. cash-creation model differs from approaches in regions like Hong Kong, where in-kind redemptions for spot Bitcoin ETFs are expected to launch in 2025, potentially attracting greater assets under management and trading volume [1].

As the SEC refines its oversight framework, the evolution of in-kind capabilities could catalyze institutional adoption of crypto ETFs, mirroring the role of authorized participants in traditional markets. However, the long-term impact on retail accessibility remains uncertain, with analysts noting that the process may take years to permeate broader investor bases [1]. For now, the focus remains on institutional efficiency gains and regulatory alignment, marking a pivotal phase in the maturation of crypto-backed exchange-traded products.

Source: [1] [Bitcoin ETFs May Soon Enable In-Kind Creations and Redemptions, Primarily Benefiting Institutional Investors July 23, 2025] [https://en.coinotag.com/bitcoin-etfs-may-soon-enable-in-kind-creations-and-redemptions-primarily-benefiting-institutional-investors/]