Crypto ETFs Get Major Relief From SEC 

The Securities and Exchange Commission just leveled the playing field between crypto ETFs and other exchange-traded products.

The regulator is allowing in-kind creations and redemptions, something that has been table stakes for most ETPs but hasn’t been permitted for spot Bitcoin, Ether and other crypto funds. The Securities and Exchange Commission approved requests Tuesday, allowing so-called authorized participants – key players in the primary ETF market – to create and redeem shares on an in-kind basis. Until now, such funds had creations and redemptions limited to cash exchanges. The big players in crypto ETFs, including BlackRock and Fidelity, have been waiting for this.

“This SEC approval is more than a procedural update — it’s a normalization milestone for crypto ETFs,” said Aisha Hunt, principal at law firm Kelley Hunt. “The in-kind restriction had been the last structural wall separating crypto ETFs from their equity and bond counterparts. By lifting it, the SEC effectively gave digital asset ETPs their final passport to full institutional legitimacy.”

At the End of the Delay

The SEC took its time before issuing Tuesday’s order, delaying the decision in part due to  caution around crypto as a whole, but also because of concerns about protecting investors against fraud and market manipulation. The approval is the latest step the Republican-led SEC has taken in its overall friendlier approach to crypto than that of former chair Gary Gensler. 

“The commission’s order eliminates the market asymmetries and inefficiencies created by cash-only redemption,” Commissioner Mark Uyeda said in a statement. “In-kind redemptions will enable crypto-asset ETPs to access the tools for managing exposure more cheaply, more transparently, and with better alignment to how asset managers and investors use ETPs in other markets.”

Along with the approval of in-kind creation and redemption, the SEC this week also voted in favor of other changes affecting crypto ETPs:

• It approved listing and trading of at least one product that would include a mix of spot Bitcoin and spot Ether, as well as an increased use of options on spot Bitcoin ETPs.
• The commission is also soliciting comments on whether an exchange should be able to list and trade two large-cap crypto ETPs.

A long time coming: The changes were long overdue for investors, Hunt said. “The in-kind approval may lay groundwork for future consideration of other digitally native asset structures and fund formats,” she said. “It also signals something deeper: The SEC is incrementally aligning legacy regulation with modern market infrastructure.”