SEC Green‑lights In‑Kind Crypto ETP Mechanism

On July 29, 2025, the U.S. Securities and Exchange Commission (SEC) approved the use of in‑kind creation and redemption mechanisms for all spot Bitcoin and Ethereum exchange‑traded products (ETPs). Previously, authorized participants could only create or redeem shares using cash, in contrast to commodity ETPs which have long relied on in‑kind transfers.

Why It Matters

• Lower Costs: The ability to exchange shares directly for crypto assets like Bitcoin or Ether eliminates the need to sell assets on the open market, reducing slippage and transaction fees.
• Improved Flexibility: This alignment with traditional commodity ETPs improves liquidity management and operational efficiency for fund managers and institutional participants.

SEC Chairman Paul S. Atkins emphasized that creating a fit-for-purpose regulatory framework for digital assets is a cornerstone of his leadership. “These new rules will make crypto ETPs less costly and more efficient,” he said. Jamie Selway, Director of the SEC’s Division of Trading and Markets, noted that the in-kind model offers meaningful benefits across the investment chain.

Regulatory and Policy Momentum

The approval reflects a broader shift in U.S. crypto policy, reinforced by a series of pro-industry legislative actions in 2025. Recent bills passed by Congress address digital asset market structure, the regulation of stablecoins, and limits on central bank digital currency implementation.

SEC Commissioner Hester Peirce previously acknowledged growing market interest in in-kind mechanisms during industry conferences, pointing to increased institutional demand for flexibility in crypto fund operations.

Crypto ETF Market Dynamics

• Bitcoin ETFs: As of late July 2025, U.S. spot Bitcoin ETFs had attracted approximately $54.98 billion in net inflows, with total assets under management exceeding $153.2 billion.
  • On July 29 alone, Bitcoin ETFs saw $157 million in inflows, while Ethereum ETFs drew $65 million, underscoring sustained institutional interest.
• Ethereum ETFs: Total assets under management crossed $11.2 billion, supported by a 17-day streak of positive inflows.

Investor enthusiasm has coincided with all-time highs in cryptocurrency valuations. In July 2025, Bitcoin’s price surged to between $118,000 and $123,000, driven by ETF demand and accumulation from institutional “whales.”