- SEC allows direct crypto-for-ETF swaps, boosting investor efficiency.
- Bitcoin and Ethereum ETFs now aligned with commodity fund standards.
- Expanded ETF options market invites larger institutional trading activity.
The U.S. Securities and Exchange Commission has officially approved in-kind creation and redemption for spot Bitcoin and Ethereum ETFs. This marks a major operational change that is expected to significantly improve fund efficiency and reduce trading costs for crypto investors.
Regulatory approval now enables ETF issuers to exchange actual Bitcoin or Ether directly for physical shares of the fund. This shift is because the cash-only system used in the past has been replaced to ensure that crypto ETFs are at par with other commodity-driven ETFs, which operate on an in-kind basis.
This approval directly affects large asset managers such as BlackRock, Ark21, Fidelity, VanEck, and Franklin Templeton. All the key exchanges, Nasdaq, NYSE Arca, and Cboe BZX, were approved to employ the in-kind structure on their crypto ETFs.
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According to the SEC, the switch to in-kind redemptions will enhance tax efficiency and ease operational complexities. It should make crypto ETFs more attractive to even institutional and retail investors who want exposure to digital assets in highly regulated vehicles.
SEC Chair Paul S. Atkins stressed that investors can enjoy lower expenses and better fund performance under the new structure. He observed that the ruling makes crypto ETFs governed by the same principles as any other commodity fund.
ETF Options Market Sees Major Expansion Alongside In-Kind Approval
Alongside the in-kind decision, the SEC approved a significant increase in the position limits for Bitcoin ETF options. The cap was raised from 25,000 contracts to 250,000, paving the way for greater institutional activity and deeper liquidity.
FLEX options were also added, which provide more tailored strategies to successful investors. These developments are designed to facilitate sophisticated trading strategies and attract more capital inflows into the Bitcoin ETF products.
This two-fold approval is strongly considered to be a breakthrough in the crypto ETF market, which is now worth more than $150 billion. With lower fees and more stability than the traditional ETF specification, the market can expect fast growth rates.
Within the first week of the change, BlackRock submitted in-kind ETH redemptions, depositing an additional $18.9 million worth of Ethereum in its coffers, indicating a rapid pickup in the revised regulation.
The SEC’s latest decisions are set to transform how crypto ETFs operate in the U.S. By allowing in-kind transactions and expanding the options market, the commission has cleared the path for broader institutional participation and long-term market maturity.
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