In a major win for the crypto industry, the US Securities and Exchange Commission (SEC) has approved a new system called “in-kind creations and redemptions” for crypto exchange-traded products (ETPs).
Until now, these funds could only create or redeem (buy back) shares by using cash. That can be an expensive and less efficient process. With this new rule, large financial institutions called authorized participants – usually big banks, brokers, or specialist trading firms – can now deliver or receive the actual Bitcoin (BTC) and Ether (ETH) directly when creating or redeeming shares, as has long been the case for European crypto ETPs. This also brings potential tax benefits for some investors and reduces friction for larger institutions that trade in these products.
This “in-kind” system matters because it’s cheaper, faster, and keeps the fund’s price closer to the real value of the underlying crypto. It’s already how popular gold or oil funds work, and now crypto ETPs can use it too. Approved issuers include BlackRock, Fidelity, Ark21, VanEck and Franklin Templeton, according to The Block.
SEC Chairman Paul Atkins said the change will make these products “less costly and more efficient” and is part of a broader push to build a clearer regulatory framework for crypto.
The SEC also approved the following related measures:
- Exchange applications to list and trade ETPs holding both spot Bitcoin and ETH
- Options and Flexible Exchange (FLEX) options on certain Bitcoin ETPs
- Increased position limits for listed Bitcoin ETP options (up to 250,000 contracts)
- Soliciting public comments on proposals to list two large-cap crypto ETPs
