In another vote of confidence for the virtual currency market, the United States Securities and Exchange Commission has approved in-kind creation and redemption for all spot Bitcoin and Ethereum ETFs. But what does that mean?
The SEC announced on July 28 that it had finalized orders allowing authorized participants to create and redeem shares of cryptocurrency exchange-traded products (ETPs) using the underlying digital currencies—Bitcoin or Ethereum—instead of cash.
This change applies to all approved spot Bitcoin and Ethereum ETFs, including those issued by industry heavyweights like BlackRock, Fidelity, Ark Invest, and VanEck.
The approvals were granted via fast-track processes to major exchanges, including Nasdaq, NYSE Arca, and Cboe BZX. These exchanges had requested permission for in-kind transactions as an alternative to the previously mandated cash-only model.
With the SEC’s green light, these platforms can now implement more efficient ETF structures in line with standard practices used for non-crypto funds.
In-kind creation and redemption is a process where institutional firms and market makers exchange ETF shares directly for the underlying asset instead of fiat currency.
In the case of crypto ETFs, it means receiving Bitcoin or Ethereum rather than dollars when redeeming shares—and providing those digital assets to create new shares.
This model is seen as more operationally efficient. It reduces reliance on liquidating assets for cash, minimizes taxable events, and cuts transaction costs. It also allows for ETF shares to be added or removed based on market demand, keeping their price closer to the value of the crypto they hold.
Experts believe this move could accelerate inflows into crypto ETFs, attract more institutional players, and improve both secondary market and tax efficiency by reducing capital gains distributions to investors.
Jamie Selway, Director of the SEC’s Division of Trading and Markets, said the change “offers flexibility and cost savings” to ETF issuers, participants, and the broader market.
Bloomberg ETF analyst James Seyffart, a longtime advocate for in-kind processes, praised the change for streamlining the ETF structure by reducing steps and intermediaries.
Now that in-kind creation and redemption are officially approved, ETF issuers are expected to roll out the new mechanisms over the coming weeks. The exchanges that received fast-tracked approvals are preparing to support the transition.
Analysts also expect this policy shift to pave the way for similar models in pending altcoin ETF proposals.
“The upcoming alt coin ETF approvals will likely allow in-kind from the very beginning. More of the right advancements in my opinion,” Seyffart tweeted on Tuesday.
This move represents a major policy shift from the SEC’s previous position under former Chair Gary Gensler, who had mandated cash-only redemptions when spot Bitcoin ETFs were first approved in January 2024.
That stance began to change earlier this year when Paul Atkins became SEC Chair. A known market-friendly figure, Atkins signaled support for a more tailored regulatory approach to crypto.
“I’m pleased the Commission approved these orders permitting in-kind creations and redemptions for an entire family of crypto asset ETPs. These approvals will benefit investors by reducing costs and improving efficiency,” Atkins said in a statement.
Atkins worked closely with SEC Commissioner Hester Peirce—widely known in the crypto world as “Crypto Mom” for her pro-innovation views. Under Peirce’s leadership of the SEC’s new Crypto Task Force, the Commission reviewed and reversed restrictive policies, paving the way for practical reforms like in-kind redemptions.
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