SEC Approves Redemption and Creation of Physical Tokens for Crypto ETPs
The cryptocurrency market just got some big news from the U.S. Securities and Exchange Commission (SEC). On July 29, 2025, the SEC announced its approval of orders allowing the “in-kind” creation and redemption of crypto-asset exchange-traded products (ETPs). This decision marks a significant change from previous approvals, which were limited to the “in-cash” creation and redemption of spot Bitcoin and Ether ETPs.
What is "in-kind" and why is it important?
Previously, when an investor wanted to buy or sell cryptocurrency ETPs, they had to do so in cash. This meant that ETP issuers had to buy or sell actual crypto assets on the open market with cash, then convert them into ETP shares or vice versa. This process could be costly and inefficient.
With “in-kind” approval, ETP issuers and authorized participants can now directly exchange crypto assets (such as Bitcoin or Ether) for ETP shares, or vice versa. This allows crypto ETPs to be synchronized with other SEC-approved commodity-based ETPs, creating a more efficient and cost-effective process.
Benefits for investors and the market
SEC Chairman Paul S. Atkins stressed that the decision is “a new day at the SEC” and a top priority in developing an appropriate regulatory framework for the crypto asset market. He believes that investors will benefit from this as it will make ETP products less expensive and more efficient.
Jamie Selway, Director of the SEC's Division of Trading and Markets, also noted that "in-kind" creation and swaps provide flexibility and cost savings for ETP issuers, authorized participants, and investors themselves, leading to a more efficient market.
The SEC's "value-neutral" approach
In addition to approving “in-kind” creation and swaps, the SEC has also passed other orders aimed at promoting a “value-neutral” approach to cryptocurrency-based products. These include:
Approval of applications to list and trade an ETP combining both Bitcoin and spot Ether.
Allows options on certain spot Bitcoin ETPs.
Enable Flexible Exchange (FLEX) options on shares of some BTC-based ETPs.
Increased position limits to the general options limit (up to 250,000 contracts) for options listed on certain BTC ETPs.
These moves show that the SEC is gradually building a more reasonable legal framework for cryptocurrencies, aiming for a deeper and more dynamic market that benefits all US investors.
The SEC’s latest decision is a positive sign for the maturing of the cryptocurrency market. By allowing “in-kind” transactions and adopting a more flexible approach, the SEC is paving the way for crypto financial products to become more efficient, accessible, and in line with traditional market standards. This promises to promote the growth and stability of the digital asset space in the future.