Bitcoin News Today: SEC Approves In-Kind Redemptions for Bitcoin and Ethereum ETFs

The U.S. Securities and Exchange Commission (SEC) has authorized in-kind creation and redemption mechanisms for exchange-traded products (ETPs) backed by Bitcoin and Ethereum, marking a major transformation in how crypto funds operate. The approval, announced in late July 2025, allows authorized participants to swap ETF shares directly for the underlying digital assets, eliminating the need for cash settlements. This mechanism, common in traditional commodity ETFs like those for gold, is expected to reduce tracking errors, lower transaction costs, and boost liquidity for investors [1].

The rule change applies to existing Bitcoin and Ethereum ETFs listed on major U.S. exchanges, including Nasdaq, NYSE, and CBOE. By enabling in-kind redemptions, the SEC is facilitating smoother handling of large fund inflows and outflows without causing price distortions in the underlying assets. This shift aligns with broader efforts to integrate crypto assets into the traditional financial system and reflects a more accommodating regulatory stance under current leadership [2].

Industry players and analysts have emphasized the potential benefits for market efficiency. The in-kind process could reduce the cost of creating and redeeming ETF shares, potentially drawing in more institutional investors and deepening market participation. Alongside the approval, the SEC also expanded options and raised position limits on Bitcoin-based ETFs, signaling a more flexible regulatory approach [3]. The adoption of these mechanisms reflects a growing consensus that crypto ETPs should be treated similarly to other commodity-based ETFs.

The change may also have implications for pending XRP ETF applications, still under review. Legal experts have noted that the new framework could streamline the approval process for XRP-based funds and reduce inefficiencies tied to cash-based transactions [4]. While the SEC has not yet ruled on XRP ETFs, the new structure offers a clearer regulatory path for applicants to follow.

The decision highlights a shift in the SEC’s approach under Chairman Paul Atkins, who has emphasized a merit-neutral stance on crypto products. This marks a departure from the more aggressive regulatory posture under former Chair Gary Gensler. The agency now appears focused on establishing consistent, structural rules that allow digital assets to coexist with traditional financial markets [5].

The move to allow in-kind redemptions is widely viewed as a step toward mainstreaming digital asset investing. By reducing operational costs and improving efficiency, the change could enhance the appeal of Bitcoin and Ethereum ETFs to a wider range of investors, including institutional participants. It also reinforces the SEC’s role as a key player in shaping the regulatory landscape for crypto finance in the U.S.

Source:

[1]title1.............................(https://www.bloomberg.com/news/articles/2025-07-29/a-quiet-sec-rule-shift-brings-crypto-etfs-closer-to-mainstream)

[2]title2.............................(https://citywire.com/pro-buyer/news/a-new-day-at-the-sec-regulator-approves-in-kind-creations-and-redemptions-for-crypto-etfs/a2471198)

[3]title3.............................(https://www.coindesk.com/markets/2025/07/29/sec-approves-in-kind-redemptions-for-all-spot-bitcoin-ethereum-etfs)

[4]title4.............................(https://coincentral.com/in-kind-etf-approval-by-sec-could-favor-pending-xrp-etf-filings-bill-morgan/)

[5]title5.............................(https://www.cryptoninjas.net/news/sec-greenlights-in-kind-crypto-etf-transactions-major-game-changer-for-bitcoin-ether-funds/)