Securities Regulation Daily Wrap Up, BLOCKCHAIN—SEC approves in-kind redemptions for crypto ETPs, touts investor cost savings, (Jul 30, 2025)
Organizations Mentioned:Cboe BZX Exchange, Inc. | Nyse Arca, Inc.
In-kind redemptions for crypto ETPs may enhance tax efficiencies and minimize transaction costs for investors, the SEC said.
The SEC has approved orders to allow in-kind creations and redemptions for crypto asset exchange-traded product (ETP) shares. With the new orders, bitcoin and ether ETPs will be able to create and redeem shares on an in-kind basis, consistent with other approved commodity-based ETPs. Previously, spot bitcoin and ether ETPs were limited to creations and redemptions on an in-cash basis.
SEC officials said the move will result in cost savings for investors.
“I am pleased the Commission approved these orders permitting in-kind creations and redemptions for a host of crypto asset ETPs,” said SEC Chairman Paul S. Atkins in a press release. “Investors will benefit from these approvals, as they will make these products less costly and more efficient."
“In-kind creation and redemption provide flexibility and cost savings to ETP issuers, authorized participants, and investors, resulting in a more efficient market,” said Jamie Selway, director of the Division of Trading and Markets.
The SEC also approved other crypto-related orders relating to mixed bitcoin and ether ETPS, options, and position limits. The orders were approved July 29, 2025.
In-kind redemption. The redemption order relates to bitcoin- and ether-based ETPs listed and traded by Nasdaq Stock Market LLC, Cboe BZX Exchange, Inc. (BZX), and NYSE Arca, Inc. (Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Cboe BZX Exchange, Inc.; NYSE Arca, Inc.; Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, to Amend Certain Bitcoin and Ether-Based Commodity-Based Trust Shares to Permit In-Kind Creations and Redemptions, Exchange Act Release No. 103571, July 29, 2025).
The products are Commodity Based Trust Shares, which are securities that hold a specified commodity deposited with the trust, and in some cases also cash. They are issued by various trusts such as iShares Bitcoin Trust and iShares Ethereum Trust.
According to the order, allowing in-kind creations and redemptions offers the trusts an additional method of transacting with authorized participants and may enhance tax efficiencies and minimize transaction costs. The SEC approved the order on an accelerated basis, stating that the changes do not raise any novel regulatory issues and are consistent with Section 6(b)(5) of the Exchange Act.
Previously, the trusts could only create or redeem their shares with authorized participants in cash. According to Commissioner Mark Uyeda, this required authorized participants to redeem ETP shares for U.S. dollars, forcing the ETP issuer to buy or sell the crypto asset on the open market. This introduces significant transaction costs, exposes the product and its investors to price slippage in the underlying asset class, and makes the ETP more expensive, said Uyeda.
Commissioner statements. Uyeda approved of the orders.
“Crypto asset ETPs will now be able to use the same processes for creations and redemptions as other comparable products, giving investors access to products in which they have expressed interest for years,” said Uyeda. “The Commission’s order eliminates the market asymmetries and inefficiencies created by cash-only redemption.”
Commissioner Hester Peirce also supported the move.
“I welcome in-kind creations and redemptions for crypto-asset ETPs, a feature that ETP sponsors and investors have wanted since the initial approvals of crypto-asset ETPs,” Peirce wrote in a post on the X social media platform.
Other orders. The SEC also approved other crypto-related orders, including:
Exchange applications seeking to list and trade an ETP that would hold mixed spot bitcoin and spot ether;
Options on certain spot bitcoin ETPs;
Flexible Exchange (FLEX) options on shares of certain BTC-based ETPs; and
An increase of position limits up to the generic limits for options (up to 250,000 contracts) for listed options on certain BTC ETPs.
The SEC also issued two scheduling orders soliciting comments related to the Division of Trading and Market’s approval of a national securities exchange’s proposals to list and trade two large cap crypto-based ETPs.
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