SEC Is Now All In On Crypto. What’s Next?

Crypto funds are about to become a whole lot more regulated — or deregulated, depending on who you ask.

After initial delays, the SEC has approved in-kind redemptions for spot Bitcoin and Ethereum ETFs. The decision is the first pro-crypto policy decision by Paul Atkins, the SEC chair confirmed earlier this year who is expected to help realize crypto evangelists’ digital currency dreams. The move also is the first major indication that the crypto industry — whose super PACs donated tens of millions to President Donald Trump’s 2024 campaign — is getting what it expected.

The decision marked “the biggest day for crypto in the history of the space,” said financial consultant Tyrone Ross Jr. “This administration, whether it’s custody, whether it’s on-chain, whether it’s ETFs … they’re making sure that crypto thrives in America.”

Will That Be Cash or Crypto?

In-kind redemptions let investors create and redeem shares of spot crypto ETFs without having to use cash — meaning authorized participants, the people with the power to change the number of ETF shares on the market, can now add or remove assets from a fund using Bitcoin or Ethereum. In a statement on the approval, Atkins said the decision is only the first step toward building “a rational regulatory framework for crypto.” But how much of these changes can be attributed to the Trump administration? “One hundred percent,” said Ross. “They are hell-bent on America becoming the main hub for crypto in the world.”

Other measures approved by the agency were:

• Advancing a “merit-neutral” approach to crypto-based products, including applications for spot crypto ETFs.
• Allowing FLEX options on shares of certain Bitcoin ETFs that let investors customize things like expiration date and strike price.

The SEC’s likely next move is specifying which coins are and aren’t securities, Ross said. “That’s the big one that everyone is still waiting for,” he said. The Commodity Futures Trading Commission is also likely to eventually update its guidance on what it will oversee, he added.

Keeping Options Open. In-kind redemption approvals took place alongside another policy change to increase positions limits for options trading on BlackRock’s spot Bitcoin exchange-traded fund, IBIT — the biggest crypto ETF on the market — from 25,000 to 250,000 contracts. BlackRock has been among the most prominent issuers pushing for deregulation, having filed for in-kind redemptions back in January. “It’s huge for the individual investor. It’s huge for BlackRock,” Ross said. “It’s huge for the entire space.”