It is a new dawn for Bitcoin and Ethereum ETFs as the US SEC retraces an earlier decision to disapprove in-kind share creation and redemption.
The US Securities and Exchange Commission announced in a blog post on Tuesday that authorized participants can now buy and redeem crypto ETPs by converting them directly into the underlying asset. This decision followed an in-house vote on whether to permit this structural change.
A New Dawn for Crypto ETFs
Before now, the US SEC allowed investors to buy and sell ETFs with cash. This means that users with cryptocurrencies would exchange them for fiat before buying shares of both Bitcoin and Ethereum spot ETFs. During redemption, holders are also only converting their shares to cash, which creates selling pressure in the crypto market. Notably, the US SEC, under Gary Gensler, only approved this strategy for the two US spot ETFs in 2024. The agency mandated that issuers adjust their filings to withdraw in-kind creation and redemption as a precursor for approval.
However, the Paul Atkins-led SEC yesterday included in-kind share redemption as an option for crypto ETPs, including the Bitcoin and Ethereum spot ETFs approved earlier. In reaction, Atkins noted that this is a new dawn in the commission, as it continues to ease the earlier strict regulatory policy on the crypto industry. Furthermore, he emphasized that investors will be the core beneficiaries of the in-kind creations and redemption, as it cuts down the cost of these products and enhances their efficiency. Notably, it would also reduce the transaction costs incurred by selling shares of the funds and liquidating cryptocurrencies to buy them.
Remarkably, both Bitcoin and Ethereum-focused funds have done exceptionally well despite this impediment. Notably, the iShares Bitcoin Trust (IBIT) became the fastest-growing ETF in history. On the other hand, the success of the BlackRock iShares Ethereum Trust (ETHA) has aided the growth of the Ethereum spot ETFs. For context, ETHA is the third-fastest fund to reach the $10 billion milestone, doing so in 125 days.
