Bitcoin News Today: SEC approves in-kind redemptions for spot Bitcoin, Ethereum ETFs, aligning with traditional commodities

The U.S. Securities and Exchange Commission (SEC) has approved in-kind redemptions for spot Bitcoin and Ethereum exchange-traded funds (ETFs), marking a pivotal regulatory shift in the crypto market. This mechanism allows investors and authorized participants (APs) to exchange ETF shares directly for the underlying cryptocurrencies—Bitcoin (BTC) or Ethereum (ETH)—instead of relying solely on cash transactions [1]. The change aligns crypto ETFs with traditional commodity-based products, such as gold or oil ETPs, which have long used in-kind redemptions to reduce transaction costs and streamline liquidity [2]. By adopting this model, the SEC has addressed inefficiencies in cash-based redemptions, which often exacerbated price volatility and created arbitrage risks due to the need for large-scale settlements [4].

The approval follows the 2024 authorization of spot Bitcoin and Ether ETFs, which initially restricted redemptions to cash-only settlements [3]. The new framework enables APs to swap ETF shares for actual crypto assets, narrowing bid-ask spreads and improving price alignment between ETFs and their underlying assets. For example, Bitwise’s ETPs highlight potential benefits, including reduced trading costs and enhanced efficiency for investors [5]. SEC Chairman Paul S. Atkins emphasized that the move aligns with the agency’s goal of creating a “fit-for-purpose” regulatory framework for crypto markets, noting that investors will benefit from “less costly and more efficient” products [8].

The in-kind redemption mechanism offers strategic advantages for institutional investors and market participants. It streamlines arbitrage opportunities, allowing APs to exploit price discrepancies with lower operational overhead. This approach also enhances hedging capabilities, particularly as the SEC recently increased position limits for Bitcoin ETF options, enabling larger exposures without regulatory constraints [6]. Additionally, the change fosters deeper participation from market makers, who can now provide liquidity with greater confidence, mitigating risks of price slippage and wash sales [7].

From a regulatory perspective, the decision reflects a pragmatic alignment with market realities. By treating crypto ETPs as commodities rather than securities, the SEC sidesteps complex debates over crypto’s classification while supporting functional market integration. This approach mirrors the agency’s broader strategy under Chair Atkins, which prioritizes innovation-compatible frameworks while maintaining investor protections [8]. Analysts suggest this precedent could influence future products, such as altcoin ETFs, which may incorporate in-kind provisions from launch [9].

For investors, the implications are twofold: improved efficiency makes crypto ETFs more attractive as core portfolio holdings, and expanded derivatives markets enable advanced risk management. However, the 19-month delay in implementing this change has drawn criticism over the SEC’s historically cautious stance [10]. Despite this, the approval signals a maturing infrastructure for crypto assets, reducing structural barriers to institutional adoption and fostering a more liquid market. While challenges persist, the move underscores crypto’s growing role in mainstream finance, offering investors tools that blend digital asset innovation with traditional financial rigor.

Sources:

[1] CoinDesk, [url1](https://www.coindesk.com/markets/2025/07/29/sec-approves-in-kind-redemptions-for-all-spot-bitcoin-ethereum-etfs)

[2] Cointelegraph, [url2](https://cointelegraph.com/news/sec-in-kind-redemptions-crypto-etps)

[3] Pensions, [url3](https://www.pionline.com/asset-management/exchange-traded-funds/pi-sec-permits-in-kind-crypto-etfs-creation-redemption/)

[4] BusinessWire, [url4](https://www.businesswire.com/news/home/20250729022997/en/Bitwises-Bitcoin-and-Ether-ETPs-to-Offer-In-Kind-Creations-and-Redemptions-Providing-Greater-Trading-Efficiency-to-Investors)

[5] AInvest, [url5](https://www.ainvest.com/news/sec-kind-redemption-approval-game-changer-crypto-etfs-market-efficiency-2507/)

[6] Coinpedia, [url6](https://coinpedia.org/news/u-s-sec-approves-in-kind-creations-and-redemptions-for-crypto-etps/)

[7] Bankless, [url7](https://www.bankless.com/read/sec-approves-in-kind-redemptions-for-btc-eth-etfs)

[8] CryptoSlate, [url8](https://cryptoslate.com/sec-approves-in%E2%80%91kind-redemptions-for-spot-bitcoin-and-ethereum-etfs/)

[9] Bloomberg Intelligence (via AInvest), [url9](https://www.ainvest.com/news/sec-kind-redemption-approval-game-changer-crypto-etfs-market-efficiency-2507/)

[10] AInvest, [url10](https://www.ainvest.com/news/sec-kind-redemption-approval-game-changer-crypto-etfs-market-efficiency-2507/)