On July 29, 2025, the U.S. Securities and Exchange Commission (SEC) voted to approve orders allowing in-kind creations and redemptions for crypto asset exchange-traded products (ETPs), including those based on bitcoin and ether. This marks a significant shift from the SEC's earlier stance, which had limited spot crypto ETPs to cash-only transactions.
Under the newly approved framework, authorized participants can now exchange crypto assets directly for ETP shares, bypassing the need to convert to U.S. dollars. This change aligns crypto ETPs with standard practices for commodity-based ETPs and was approved with an aim to reduce transaction costs, minimize price slippage, and improve overall market efficiency.
SEC Chairman Paul S. Atkins described the move as part of a broader effort to develop a "fit-for-purpose regulatory framework" for crypto markets. "Investors will benefit from these approvals, as they will make these products less costly and more efficient," Atkins said in a statement. Commissioner Mark Uyeda echoed this sentiment, noting that the prior cash-only model imposed unnecessary burdens and created market asymmetries.
The SEC also approved several related measures, including:
- ETPs holding mixed spot bitcoin and ether;
- Options on certain spot bitcoin ETPs;
- FLEX options on shares of certain BTC-based ETPs;
- Increased position limits for listed options on BTC-based ETPs (up to 250,000 contracts); and
- Scheduling orders seeking public comment on proposals to list and trade two large-cap crypto-based ETPs.
The SEC's decision is expected to facilitate greater institutional participation by streamlining arbitrage and hedging strategies. While the move signals a more open regulatory posture under Chairman Atkins, stakeholders should remain attentive to how these changes are implemented and monitored. As the crypto ETP landscape continues to evolve, regulatory clarity will be key to fostering innovation while protecting investors.
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