Ethereum News Today: SEC Approves In-Kind ETF Transactions for Bitcoin and Ethereum

The U.S. Securities and Exchange Commission has approved in-kind creations and redemptions for spot Bitcoin and Ethereum ETFs, marking a significant regulatory shift in the crypto market. Effective from July 29, 2025, this development allows authorized participants to exchange ETF shares directly for the underlying digital assets, rather than being restricted to cash transactions [1]. This mechanism aligns crypto ETFs with traditional commodity ETFs, such as those for gold, enhancing market efficiency and reducing transaction costs [2].

The approval reflects a broader regulatory effort to integrate crypto assets into the mainstream financial system. Previously, crypto ETFs operated under cash-only models, which created inefficiencies in arbitrage and liquidity provision. The in-kind mechanism now permits smoother asset exchanges, potentially tightening bid-ask spreads and reducing price distortions [3]. This change is expected to facilitate larger institutional participation and lower entry barriers for investors seeking exposure to digital assets [4].

The decision comes amid ongoing regulatory advancements, including the SEC's recent acknowledgment of a Nasdaq filing proposing to allow staking for the iShares Ethereum Trust (ETHA). While the staking application remains pending, it signals a growing acceptance of active income-generating strategies within ETF structures [5]. Analysts suggest that the in-kind mechanism could reduce the need for intermediaries and streamline capital flows between crypto and traditional markets, particularly benefiting institutional custodians and large-scale digital asset handlers [6].

Paul S. Atkins, the newly appointed SEC Chairman, emphasized that this initiative is part of a broader effort to establish a “fit-for-purpose” regulatory framework for crypto markets. He described the approval as a key step toward making these products more accessible and cost-effective for investors [7]. The move is expected to encourage further innovation in the digital asset space, including the development of new financial products and services [8].

The approval of in-kind redemptions and creations underscores the SEC’s evolving approach to digital assets and reflects a broader trend toward regulatory clarity. As the crypto ETF market continues to mature, these changes are likely to shape the sector’s long-term trajectory, influencing both market structure and investor behavior.

Sources:

[1] SEC.gov (https://www.sec.gov/newsroom/press-releases/2025-101-sec-permits-kind-creations-redemptions-crypto-etps)

[2] ETF.com (https://www.etf.com/sections/news/sec-approves-kind-crypto-etf-redemptions)

[3] Ledger (https://www.ledgerinsights.com/sec-allows-in-kind-crypto-etf-redemptions-impacting-bank-indirect-exposures/)

[4] MarketsMedia (https://www.marketsmedia.com/sec-approval-of-in-kind-creations-redemptions-for-crypto-etps-is-huge/)

[5] UnchainedCrypto (https://unchainedcrypto.com/sec-approves-in-kind-redemptions-for-spot-crypto-etfs/)

[6] CrowdfundInsider (https://www.crowdfundinsider.com/2025/07/247047-sec-to-allow-in-kind-redemptions-for-crypto-etfs/)

[7] InvestmentExecutive (https://www.investmentexecutive.com/news/from-the-regulators/crypto-etfs-get-relief-from-sec/)

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