Key Takeaways:
- The SEC now allows in-kind creations and redemptions for crypto ETFs, removing the mandatory cash-only rule.
- This change brings crypto ETPs in line with traditional commodity-based ETFs, cutting costs and boosting efficiency.
- Analysts expect increased institutional adoption and liquidity, setting the stage for a new phase in crypto ETF growth.
The U.S. Securities and Exchange Commission (SEC) has made a major rule change which will soon benefit crypto holders. The move is hoped to cut costs, increase pricing efficiency and encourage increased institutional participation in crypto ETFs, particularly those that track Bitcoin and Ether.
Read More: SEC Pushes Crypto ETF Decisions Again, $100B Market Waits on Truth Social and Grayscale Rulings
SEC Drops Cash-Only Requirement for Crypto ETFs
So far, any crypto ETP was limited to handle only cash-based creation and redemption, i.e., authorized participants (APs) of a crypto ETP were obliged to cash-in crypto assets when creating or redeeming an ETF share. This was not only time consuming, costly but also subject to pricing discrepancy problems.
On July 29, 2025, the SEC officially approved in-kind creation and redemption mechanisms for crypto ETFs, allowing market makers to directly deposit or withdraw cryptocurrencies like Bitcoin (BTC) or Ether (ETH) without cash conversion. This rule brings crypto ETPs closer to traditional commodity ETFs that already benefit from in-kind flexibility.
“It’s a new day at the SEC,” said Chairman Paul S. Atkins. “These orders will make crypto-based products less costly and more efficient.”
According to the SEC’s press release, the new framework aims to build a rational, long-term regulatory structure that treats crypto more like established asset classes. It also reflects a “merit-neutral” approach, evaluating crypto ETPs using the same standards applied to non-crypto commodities.
Read More: SEC Pauses Bitwise Crypto ETF Just After Approval; What’s Behind the Shock Decision?
Why In-Kind Matters for the Crypto Market
In-kind mechanism is not a technical change; it is a paradigm change. It opens up operational benefits which makes ETFs more appealing to both issuers and investors.
Key Benefits of In-Kind Creation & Redemption
- Lower Costs: Without the need to convert to cash, issuers avoid unnecessary fees and slippage from crypto-to-fiat conversions.
- Faster Settlement: Transfers can be processed directly on-chain, reducing delays.
- Tighter Price Alignment: In-kind…
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