The U.S. Securities and Exchange Commission has approved in-kind creation and redemption mechanisms for all spot Bitcoin and Ethereum exchange-traded funds, enabling authorized participants to transact ETF shares directly in BTC or ETH rather than using cash [1]. This move is expected to streamline the ETF creation and redemption process by reducing settlement costs and enhancing operational efficiency [2].
The change represents a major shift in the regulatory treatment of crypto-based ETFs, aligning them with traditional ETF structures that have long used in-kind mechanisms [3]. Previously, cash-based transactions introduced complexities and potential price mismatches between the ETF and its underlying assets. With the new in-kind process, institutional investors can now more precisely track investor demand and adjust ETF share supply in real time [4].
Industry observers note that the approval could enhance the attractiveness of crypto ETFs by making them more accessible and cost-effective for both institutional and retail investors [5]. The decision also supports broader efforts to integrate digital assets into mainstream financial markets, offering a smoother entry point for those seeking exposure to Bitcoin and Ethereum [6].
The approval follows a regulatory environment that has increasingly shown openness to structured investment vehicles for digital assets. Alongside the approval of spot crypto ETFs in early 2024, this move underlines a growing regulatory acceptance of cryptocurrencies as legitimate investment products [7]. Analysts suggest that the adoption of in-kind mechanisms could spur further innovation and competition in the space, as asset managers refine their offerings to meet expanding demand [8].
This development also signals greater regulatory confidence in the liquidity and maturity of the Bitcoin ETF market. The SEC’s recent decision to raise position limits for options trading on the iShares Bitcoin Trust (IBIT) is another example of this trend, granting institutional investors more flexibility in hedging and strategic trading [9]. Together, these changes may significantly increase institutional participation in both Bitcoin and Ethereum ETF markets by reducing friction in arbitrage and hedging activities.
The regulatory shift highlights the evolving approach under SEC Chair Paul Atkins, who has emphasized the need for a “fit-for-purpose” framework for crypto asset markets [10]. By adopting in-kind mechanisms, the SEC is taking a step toward treating digital assets within the same regulatory context as traditional financial instruments, reflecting a broader recognition of their role in modern investment portfolios [11].
Source:
[1] U.S. Crypto Strategy, ETF Reform & Base Chain Surge | Galaxy (https://www.galaxy.com/insights/research/weekly-top-stories-08-01-25)
[2] Ethereum (ETH) ETFs Match Historic Inflow Streak, Eye … (https://crypto-economy.com/ethereum-eth-etfs-match-historic-inflow-streak-eye-new-milestone/)
[3] Latest News on Bitcoin, Altcoins & Market Updates (https://cryptoadventure.com/news/)
[4] Bitcoin is witnessing a notable resurgence in accumulation … (https://www.instagram.com/p/DMxgOpiJyws/)
[5] DOGEUSD – XRP ETF Approval Incoming? Analyst Eyes … (https://ih.adv.fn.com/stock-market/COIN/DOGEUSD/crypto-news/96539168/xrp-etf-approval-incoming-analyst-eyes-september)
[6] nequi (https://nequi.org/)
[7] Solana ETFs edge closer to approval as Grayscale and … (https://cryptorank.io/news/feed/31a41-solana-etfs-edge-closer-to-approval)
[8] Bloomberg Analyst Predicts XRP ETF Approval In … (https://www.facebook.com/manuel.guevarra.369210/posts/bloomberg-analyst-predicts-xrp-etf-approval-in-september-or-octoberbloomberg-ana/733912442855300/)
[9] CoinDesk: Bitcoin, Ethereum, XRP, Crypto News and Price Data (https://www.coindesk.com/)
[10] https://www.coindesk.com/markets/2025/07/29/sec-approves-in-kind-redemptions-for-all-spot-bitcoin-ethereum-etfs
