The Securities and Exchange Commission (SEC) approved the creation and redemption of cryptocurrency exchange-traded fund shares in kind. Now authorized representatives can exchange shares directly for the underlying crypto assets instead of receiving cash.
The regulator announced that existing Bitcoin and Ethereum funds have been granted permission to create and redeem shares in kind. This decision concerns already functioning spot cryptocurrencies.
New rules will reduce costs for market participants
"Today is a new day at the SEC, and a key priority of my leadership is to develop an appropriate regulatory framework for crypto asset markets," said SEC Chairman Paul Atkins.
According to Atkins, the new rules will make cryptocurrency exchange products "less costly and more efficient." Jamie Selway, the SEC's trading and markets director, noted: "Creation and redemption in kind provide flexibility and cost savings for issuers of exchange products, authorized participants, and investors, leading to a more efficient market."
In the context of already approved spot cryptocurrency ETFs, redemption in kind allows investors to receive the underlying assets – Bitcoin or Ethereum – instead of cash when redeeming shares. This method is considered more efficient as it allows authorized fund participants to avoid selling assets on the market, potentially reducing transaction costs.
Change in regulatory approach to cryptocurrencies
When the SEC approved spot Bitcoin and Ethereum ETFs in 2024, the regulator only allowed cash redemptions, refusing to approve the creation and redemption in kind. Since then, momentum has gradually shifted towards accepting redemptions in kind.
These changes reflect a broader industry trend towards a cryptocurrency-friendly policy. The movement is largely driven by the Trump administration's commitment to supporting the growth of the sector. Additional momentum was gained earlier this month when Congress passed three important cryptocurrency-related bills: CLARITY (Digital Asset Market Clarity), aimed at creating a cryptocurrency market structure, the GENIUS (Guiding and Establishing National Innovation for US Stablecoins) stablecoin bill, and the Anti-CBDC Surveillance State Act.
