SEC Approves In-Kind Transactions for Spot Bitcoin, Ethereum ETFs in Major Policy Shift
The U.S. Securities and Exchange Commission (SEC) has authorized in-kind creation and redemption for all spot Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds, marking a pivotal change in how crypto-backed ETFs operate in the U.S.
The ruling enables authorized participants—typically institutional market makers—to directly create or redeem ETF shares using BTC or ETH instead of cash. This structure is widely seen as more efficient, reducing friction in arbitrage, improving tracking, and enhancing overall fund liquidity.
The move represents the first significant crypto-forward policy under new SEC Chair Paul Atkins, who emphasized the need for a “fit-for-purpose regulatory framework” tailored to digital assets.
“These approvals will make crypto ETPs more efficient and cost-effective for investors,” said Atkins. “It’s a new day at the SEC.”
The change follows lobbying efforts from major ETF issuers, including BlackRock, which submitted a request in January for in-kind functionality for its iShares Bitcoin Trust (IBIT). Fidelity and Ark Invest also followed with similar filings.
Previously, all SEC-approved spot Bitcoin ETFs—first cleared in January 2024—operated under a cash-only structure, which many institutional players viewed as operationally burdensome and inefficient.
In tandem with the in-kind approvals, the SEC also raised position limits for options tied to IBIT, allowing institutions to manage larger exposures through derivatives. Position limits are regulatory caps aimed at curbing market manipulation and excessive concentration risk.
Analysts say the dual changes could catalyze deeper institutional flows into both spot and derivative markets for crypto ETFs.
The decision signals a broader shift in regulatory posture under Atkins, aligning crypto financial products more closely with existing rules that govern traditional asset classes.
