Key Takeaways
The SEC approved in-kind creations and redemptions for crypto ETFs, allowing asset managers to swap crypto tokens for ETF shares directly instead of using cash.
Bitwise became the first to adopt the new structure for its Bitcoin and Ether ETFs.
Analysts stress the change improves efficiency and cost but won’t impact retail investors’ ability to redeem ETFs for crypto.
The U.S. Securities and Exchange Commission (SEC) has approved a structural change for crypto exchange-traded funds (ETFs) that analysts say is a backend upgrade, not a retail game-changer.
The rule, announced July 29, allows ETF issuers to use in-kind creations and redemptions, meaning asset managers can exchange Bitcoin (BTC) and Ethereum (ETH) directly for ETF shares, bypassing cash conversions.
Bloomberg ETF analyst Eric Balchunas called the change “a plumbing fix,” explaining on X:
“This doesn’t mean retail can exchange IBIT for actual bitcoin, but it shows the SEC is ready to treat crypto like a legit asset class.”
Bitwise Moves First, Others Likely to Follow
Bitwise Asset Management is the first U.S. ETF issuer to implement the new system, announcing Thursday that its Bitcoin (BTC) and Ether (ETH) ETFs will now offer in-kind creations and redemptions.
According to Bitwise President Teddy Fusaro, the ruling puts crypto ETFs on “the same foundation” as traditional ETF products, cutting out conversion fees and improving pricing accuracy, spreads, and operational efficiency.
Former SEC Chair Gary Gensler had previously resisted in-kind creations due to concerns over “funds sourced from bad places,” but the shift signals a growing willingness to align crypto products with mainstream financial infrastructure.
US Bitcoin ETFs Now Hold Over 6% of Supply
The SEC’s rule change comes as U.S. Bitcoin ETFs continue to accumulate BTC at record pace.
According to Bitbo data, the 12 U.S. Bitcoin ETFs now hold 1,299,401 BTC — 6.18% of Bitcoin’s 21 million total supply.
BlackRock’s iShares Bitcoin Trust (IBIT) leads with 740,601 BTC worth $87.66B.
Fidelity Wise Origin Bitcoin Fund follows with 205,864 BTC ($24.37B).
Bitwise Bitcoin ETF holds 40,638 BTC ($4.81B).
“This move lays the groundwork for deeper integration between digital assets and the traditional financial system,” said Federico Brokate, U.S. business head at 21Shares, in a statement to Cointelegraph.
The SEC’s new rule doesn’t mean retail investors can redeem ETF shares for crypto directly — but it does streamline operations, lower costs, and signals that regulators increasingly view Bitcoin and Ethereum ETFs as part of the core ETF ecosystem, according to Cointelegraph.
