Bitcoin News Today: SEC Approves Physical Redemption for Bitcoin, Ethereum ETFs Reducing Costs, Boosting Liquidity

The U.S. Securities and Exchange Commission has approved a physical redemption mechanism for Bitcoin and Ethereum ETFs, effective July 29-30, 2025, marking a significant shift in regulatory alignment between digital assets and traditional financial instruments [1]. This mechanism allows authorized participants to redeem ETF shares for the underlying cryptocurrency assets directly, bypassing the previous cash-only redemption model [1]. The change is expected to reduce transaction costs, enhance market efficiency, and improve liquidity for crypto ETFs, aligning them with how commodity ETFs operate [1].

The approval reflects a strategic effort by the SEC to bridge gaps between digital and traditional asset markets. SEC Chair Paul Atkins spearheaded the initiative, while Director Jamie Selway emphasized the benefits of in-kind redemptions, stating they provide “flexibility and cost savings to ETP issuers, authorized participants, and investors, resulting in a more efficient market” [1]. By eliminating the need for intermediaries to convert digital assets into cash during redemptions, the process minimizes capital gains events for investors and narrows the price discrepancy between ETF shares and their underlying assets [1]. This could also encourage arbitrage strategies, fostering greater stability in crypto investment vehicles [1].

The operational shift addresses longstanding inefficiencies in the crypto ETF market. Previously, cash-only redemptions increased costs and reduced liquidity, deterring institutional adoption. The new in-kind mechanism reduces these barriers, potentially boosting institutional investor confidence and participation in crypto markets [1]. Additionally, the change may yield tax advantages for investors, as direct asset transfers avoid triggering taxable events during ETF transactions [1].

Analysts suggest the approval could catalyze broader regulatory developments in the crypto sector. While the immediate focus is on ETF efficiency, the move signals the SEC’s willingness to modernize frameworks for digital assets [1]. However, challenges such as market volatility and regulatory scrutiny of crypto infrastructure remain, which could influence future adjustments to these policies [1].

Source: [1] SEC Approves Physical Redemption for Bitcoin, Ethereum ETFs, [https://coinmarketcap.com/community/articles/68899afc18497f35e556d701/].