- The SEC allows in-kind redemptions for Bitcoin and Ethereum ETFs to reduce transaction costs and align with gold ETP practices.
- Options on Bitcoin ETFs and increased position limits aim to expand the crypto ETF derivatives market significantly.
- New crypto ETF rules reflect broader regulatory efforts to bring digital assets into the U.S. financial system structure.
The United States Securities and Exchange Commission has announced that spot Bitcoin and Ethereum exchange-traded funds can now conduct in-kind redemptions. This policy change allows authorized participants to create and redeem ETF shares using actual crypto assets rather than cash. The update aligns digital asset ETFs with established practices followed by commodity-based ETPs such as gold.
According to the SEC’s official statement, the decision is intended to lower transaction costs and enhance operational efficiency. Paul S. Atkins, Chairman of the SEC, stated that the measure is part of an ongoing effort to create a workable regulatory structure for crypto markets. Jamie Selway, Director of the Division of Trading and Markets, emphasized that the move adds flexibility for issuers and provides more options for institutional investors.
Expanded Options and Position Limits Boost Derivatives Market
Alongside the in-kind redemption approval, the SEC has approved options trading on certain spot Bitcoin ETFs and FLEX options on ETP shares. In a related move, position limits for Bitcoin ETF options were raised from 25,000 to 250,000 contracts. This increase is expected to promote growth in the derivatives segment linked to digital assets.
Bloomberg analysts have acknowledged the significance of these updates. Eric Balchunas shared industry feedback, noting that the expanded options could lead to a surge in ETF-related trading products. Fellow analyst James Seyffart pointed out that future altcoin ETF filings are also expected to include in-kind provisions. Nate Geraci, president of The ETF Store, highlighted that these updates mark a regulatory shift aimed at integrating crypto assets into the traditional financial system.
Approval Adds Momentum Following Legislative Support
The SEC’s latest ruling follows broader regulatory developments, including the signing of the Genius Act. This law reflects recent efforts to establish clearer rules for digital assets in the U.S. financial sector. With the new approvals, the SEC aims to treat crypto ETFs more like traditional commodities, supporting market structure and access for both institutional and retail investors.
