Bitcoin News Today: SEC Approves In-Kind Crypto ETF Mechanism Boosting Institutional Efficiency

The U.S. Securities and Exchange Commission (SEC) recently approved a significant structural change in the rules governing crypto ETFs, enabling in-kind creation and redemption mechanisms. Experts describe the move as a back-end upgrade that primarily benefits institutional investors rather than altering the experience for retail investors [1]. Under the new framework, asset managers can now directly exchange Bitcoin (BTC) or Ether (ETH) for ETF shares instead of using cash, reducing conversion costs and improving pricing accuracy for providers [1].

Eric Balchunas of Bloomberg emphasized that the change does not allow individual investors to exchange ETF shares like IBIT for physical Bitcoin [1]. This aligns with previous concerns from SEC leaders such as Gary Gensler, who had been cautious about in-kind models due to questions around the origin of the underlying crypto assets [1]. Bitwise Asset Management was the first U.S. issuer to implement in-kind redemptions following the SEC’s ruling on July 29, with both its Bitcoin and Ether ETFs adopting the new structure [1].

The change brings crypto ETFs closer to the operational model of traditional exchange-traded products, according to Teddy Fusaro, President of Bitwise, who stated that it aligns crypto funds with institutional-grade ETF structures [1]. Federico Brokate of 21Shares described the development as foundational for the further integration of crypto into the mainstream financial system [1].

Amid this regulatory shift, U.S. Bitcoin ETFs continue to accumulate substantial holdings. As of July 31, they collectively held over 1.29 million BTC, representing approximately 6.18% of the total circulating supply [1]. BlackRock’s iShares Bitcoin Trust leads with 740,601 BTC, valued at nearly $88 billion. Fidelity and Bitwise follow with holdings of over 205,000 BTC and 40,000 BTC, respectively [1].

This evolution in crypto ETF structures reflects a broader movement toward standardization and efficiency in the market, offering greater flexibility for institutional participants and fostering deeper integration with traditional financial systems [1].

Source: [1] SEC’s Crypto ETF Rule Marks Structural Shift, Not Retail Gamechanger (https://btc-pulse.com/secs-crypto-etf-rule-marks-structural-shift-not-retail-gamechanger/)