Bitcoin News Today: SEC Approves In-Kind Mechanism for Crypto ETPs Boosting Efficiency and Liquidity

The U.S. Securities and Exchange Commission has approved the use of in-kind creation and redemption mechanisms for cryptocurrency exchange-traded products (ETPs), a move that aligns these digital asset vehicles more closely with traditional commodity ETF structures. The change, which was announced on July 15, allows authorized participants to exchange Bitcoin or Ethereum directly for ETF shares, eliminating the need for cash-based transactions [1]. This regulatory shift reflects a broader recognition of the structural advantages that in-kind mechanisms offer, particularly in improving efficiency and reducing costs in the crypto market [2].

The approval is expected to significantly impact the liquidity and pricing dynamics of Bitcoin and Ethereum. By enabling direct asset transfers, the mechanism allows for tighter bid-ask spreads and more accurate tracking of net asset value (NAV). This development could lead to a $710 billion supply squeeze for Bitcoin ETFs, as institutional investors are expected to increase their participation in a more cost-effective and transparent environment [5]. Market analysts note that the move removes a key structural barrier that had previously distinguished crypto ETPs from traditional ETFs, potentially opening the door to broader institutional adoption [3].

Institutional market players, including major financial firms, are expected to benefit from reduced transaction costs and enhanced operational efficiency. The in-kind mechanism could also streamline the creation of new crypto ETPs, potentially benefiting pending applications for products like XRP-based ETFs [4]. However, the SEC has not provided a timeline for the approval of new crypto ETPs, underscoring that regulatory scrutiny remains a critical factor in the industry’s development.

The adoption of in-kind redemptions may also reshape the supply dynamics of Bitcoin ETFs, especially in the context of large-scale institutional inflows. The mechanism could reinforce the role of crypto ETPs in driving demand for the underlying assets, mirroring historical trends observed in traditional commodity markets [5]. The SEC’s decision highlights a cautious yet progressive regulatory approach, demonstrating the agency’s willingness to adapt to evolving market conditions while maintaining a focus on investor protection.

The long-term success of the in-kind model for crypto ETPs will depend on how effectively the mechanisms are implemented and how they impact liquidity and accessibility for both retail and institutional investors. If successful, this development could mark a significant step toward the mainstream adoption of crypto ETPs and the broader integration of digital assets into the traditional financial system.

Source: [1] SEC Authorizes Use of In-Kind Redemptions for Crypto ETPs (https://www.bloomberg.com/news/articles/2025-07-29/a-quiet-sec-rule-shift-brings-crypto-etfs-closer-to-mainstream)

[2] In-Kind Bitcoin (BTC) and Ether (ETH) ETFs: How They Will (https://www.coindesk.com/markets/2025/07/30/in-kind-bitcoin-and-ether-etfs-how-they-will-reshape-the-crypto-market)

[3] How Will SEC's Approval of In-Kind Redemptions for (https://finance.yahoo.com/news/kind-bitcoin-ether-etfs-reshape-114151173.html)

[4] In-Kind ETF Approval by SEC Could Favor Pending XRP (https://coincentral.com/in-kind-etf-approval-by-sec-could-favor-pending-xrp-etf-filings-bill-morgan/)

[5] SEC's in-kind approval can spark HUGE $710 billion (https://cryptoslate.com/secs-in-kind-approval-can-spark-huge-710-billion-supply-squeeze-for-bitcoin-etfs/)