- SEC Commissioner confirms the agency is open to reviewing in-kind redemption models for Bitcoin ETFs amid growing demand from issuers.
- BlackRock and other firms filed proposals earlier this year, seeking more streamlined redemption processes for Bitcoin ETFs.
- In-kind redemptions could ease tax reporting and operational challenges compared to the current in-cash model for Bitcoin ETF transactions.
The U.S. Securities and Exchange Commission is now considering proposals to allow in-kind redemptions for Bitcoin exchange-traded funds. This follows a public statement by SEC Commissioner Hester Peirce, who confirmed that the agency is open to reviewing the possibility after earlier restrictions.
Earlier in 2025, BlackRock submitted a proposal to the Nasdaq seeking approval for in-kind redemptions. The filing came after the initial approval of spot Bitcoin ETFs, which required issuers to use only in-cash redemption methods. BlackRock had agreed to that requirement as part of the original approval conditions.
In-Kind Redemptions Seen as Operationally Efficient
In the in-kind model, ETF shares are exchanged for actual Bitcoin, rather than cash. This process allows authorized participants to settle redemptions directly with the underlying digital asset. It is generally viewed as a more efficient system, particularly for reducing conversion steps and minimizing delays in trade settlements.
At present, issuers have to turn Bitcoin into U.S. dollars for exchange with investors. People have pointed out that this approach can introduce difficulties with daily processes. Also, selling Bitcoins to cover redemption can make them taxable, which increases the workload for investors and managers.
Regulatory Attitudes Begin to Shift
Commissioner Peirce’s comments reflect a growing willingness inside the SEC to revisit policies surrounding Bitcoin ETFs. Although the agency initially required all redemptions to be made in cash, issuers such as ARK and BlackRock have pushed for alternatives. These firms argue that in-kind models more closely align with the practices used in traditional commodity-based ETFs.
Multiple ETF providers proposed in-kind mechanisms during the early months of 2025. The momentum behind these proposals has now gained regulatory attention. The SEC’s potential policy shift would mark a significant development in the digital asset space, offering issuers a more flexible and tax-efficient operating framework.
