SEC Approves In-Kind Transactions for Crypto ETPs, Marking Regulatory Shift

​The U.S. Securities and Exchange Commission has approved new rules allowing in-kind creations and redemptions for crypto exchange-traded products (ETPs), a significant departure from the prior requirement for cash-only transactions.

This regulatory update aligns crypto ETPs - specifically those tied to bitcoin and ether - with traditional commodity-based funds like those backed by gold. Issuers can now use the underlying digital assets directly to manage share flows, potentially reducing costs and improving efficiency.

"It's a new day at the SEC," said Chairman Paul Atkins. "Investors will benefit from these approvals, as they will make these products less costly and more efficient."

The Commission also greenlit several supporting measures: a mixed bitcoin-ether ETP, expanded options trading on bitcoin ETPs, and a raised position limit for listed bitcoin options - now on par with other high-volume contracts.

In tandem, the SEC issued public comment orders on proposals to list two large-cap crypto ETPs, underscoring its intent to evaluate digital asset products under a "merit-neutral" lens.

The move marks a broader shift toward regulatory normalization for digital assets, suggesting increased willingness by the SEC to treat crypto instruments similarly to other mainstream financial products.