Bitcoin News Today: SEC Approves In-Kind Redemptions for Crypto ETFs, Boosting Institutional Efficiency

The U.S. Securities and Exchange Commission (SEC) has approved in-kind creation and redemption mechanisms for cryptocurrency exchange-traded products (ETPs), a regulatory shift that allows institutional investors to exchange physical crypto tokens for ETF shares and vice versa without cash transactions [1][2]. This decision, confirmed on July 24, 2025, applies to spot Bitcoin and Ethereum ETFs, including offerings from major asset managers like BlackRock [3]. By enabling direct asset swaps, the SEC aims to enhance market efficiency, reduce transaction costs, and align crypto ETP mechanics with traditional commodity ETPs [4]. The move is expected to lower price distortions, improve liquidity, and expand options for institutional and retail investors [5].

The approval introduces a more flexible framework for ETP issuers and authorized participants, who can now process large positions without disrupting cash flows [6]. For example, Bitwise’s Bitcoin and Ethereum ETPs will offer greater trading efficiency under this model [7]. The SEC’s decision also reflects a “merit-neutral approach” to approving new crypto products, as noted by Bloomberg, signaling broader regulatory flexibility for the sector [8]. This includes potential approvals for mixed-product structures, which could diversify the range of ETPs available to investors [4].

Analysts highlight that in-kind mechanisms address a long-standing inefficiency in crypto ETP creation processes. Previously, cash-based transactions relied on intermediaries to buy or sell underlying assets, creating friction and price discrepancies [9]. By streamlining operations, the SEC’s ruling reduces dependence on third-party liquidity providers, potentially bolstering on-chain liquidity as institutional participation grows [10]. The change is seen as a pragmatic response to market evolution, fostering a more mature ecosystem for digital assets [6].

Key figures in the development include SEC Chairman Paul S. Atkins and Director Jamie Selway, who emphasized that in-kind processes “provide flexibility and cost savings to ETP issuers, authorized participants, and investors” [11]. The regulatory shift could attract new capital to crypto ETPs, particularly from traditional asset managers seeking to expand their offerings. However, while the mechanism mitigates operational costs, it does not inherently stabilize crypto prices, which remain subject to broader market dynamics [12].

The approval marks a significant milestone in the SEC’s engagement with crypto regulation, aligning the agency’s approach with growing institutional demand for crypto exposure. By removing operational barriers, the decision positions crypto ETPs as viable tools for hedging and portfolio diversification, potentially enhancing transparency and adoption for digital assets over time [5].

Sources:

[1] Cointelegraph, https://cointelegraph.com/news/sec-in-kind-redemptions-crypto-etps

[2] Reuters, https://www.reuters.com/technology/us-securities-regulator-allows-in-kind-crypto-etf-redemptions-2025-07-29/

[3] TheBlock, https://www.theblock.co/post/364703/sec-approves-in-kind-redemptions-for-spot-bitcoin-and-ethereum-etfs-increases-options-limits

[4] Decrypt, https://decrypt.co/news-explorer?pinned=1112576&title=sec-approves-in-kind-redemptions-for-bitcoin-and-ethereum-etfs

[5] Bloomberg, https://www.bloomberg.com/news/articles/2025-07-29/a-quiet-sec-rule-shift-brings-crypto-etfs-closer-to-mainstream?srnd=phx-etfs

[6] Medium, https://medium.com/@carlosdesantiago/crypto-just-got-institutional-sec-eliminates-key-etf-friction-7c586886f0ee

[7] Morningstar, https://www.morningstar.com/news/business-wire/20250729022597/bitwises-bitcoin-and-ether-etps-to-offer-in-kind-creations-and-redemptions-providing-greater-trading-efficiency-to-investors

[8] Cryptopolitan, https://www.cryptopolitan.com/sec-approves-in-kind-redemptions/

[9] Coinpedia, https://coinpedia.org/news/u-s-sec-approves-in-kind-creations-and-redemptions-for-crypto-etps/

[10] Decrypt, https://decrypt.co/news-explorer?pinned=1112576&title=sec-approves-in-kind-redemptions-for-bitcoin-and-ethereum-etfs

[11] SEC Director Jamie Selway, https://coinmarketcap.com/community/articles/6889897e9a74da68329e4ff9/

[12] TheBlock, https://www.theblock.co/post/364703/sec-approves-in-kind-redemptions-for-spot-bitcoin-and-ethereum-etfs-increases-options-limits