The U.S. Securities and Exchange Commission (SEC) has officially approved the in-kind creation and redemption method for cryptocurrency exchange-traded products (ETPs). This measure is considered a significant turning point in improving market efficiency, as it allows ETP issuers and authorized trading participants to exchange ETP shares using cryptocurrency assets such as Bitcoin (BTC) or Ethereum (ETH) instead of the existing cash-centered system.
On the 2nd (local time), the SEC announced in a statement that they "allow in-kind creation and redemption for already approved Bitcoin and Ethereum-based spot ETFs, enabling market participants to enjoy better cost structures and flexibility." Paul Atkins, SEC Commissioner, emphasized, "A new era has opened at the SEC" and that "establishing a suitable regulatory framework for the cryptocurrency market is a key task for me as chairman."
The key point of this policy shift is that ETF investors can now trade using cryptocurrency assets themselves when recovering funds or supplementing shares, rather than using US dollars. This means that when redeeming funds, there will be no need to sell cryptocurrency assets, significantly reducing transaction costs. Jamie Selway, head of SEC's Market and Trading Division, stated that "this method is a win-win for ETP issuers, authorized participants, and investors" and that it "will promote overall market liquidity and efficiency."
In fact, in-kind redemption in the ETF structure means more transparent and physical asset flow, which is expected to reduce concerns about market manipulation and improve regulatory oversight efficiency. It is being interpreted as a signal of a practical transformation in the management of cryptocurrency exchange-based ETFs.
This is part of the follow-up reorganization process after the approval of Bitcoin spot ETFs in the U.S. market, and it is evaluated as having refined the infrastructure that the SEC previously only allowed for cash-based entry and exit. The industry is expressing expectations that this decision could accelerate the entry of cryptocurrency ETPs into the institutional market and serve as a catalyst for new institutional inflows.
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