Crypto-linked ETFs in the United States just took a big step closer to mainstream financial markets.
In a move that many ETF issuers have waited nearly two years for, the US Securities and Exchange Commission has approved in-kind creation and redemption for spot Bitcoin and Ethereum exchange-traded products.
The decision replaces the previous cash-only model and is expected to reduce costs and improve trading efficiency.
For the crypto industry, it’s a game-changer that directly connects the digital asset sector with the traditional stock market.
Previously, authorised participants—typically large banks and trading firms—were required to handle creations and redemptions in cash.
That meant selling or purchasing crypto on behalf of the fund, creating additional friction and costs.
Under the new rule, these participants can now deliver or receive Bitcoin or Ethereum directly when managing ETF shares.
This allows for smoother transactions and tighter spreads, especially during market volatility.
Investors trading ETF shares on exchanges will not notice a difference on the surface.
But behind the scenes, the structure now mirrors how commodity-based ETFs like gold operate.
Bloomberg ETF analyst Eric Balchunas described the move as a significant milestone, saying the SEC “just approved in-kind creation/redemption for all spot bitcoin and ether ETFs.”
According to SEC Chairman Paul Atkins in a release,
“It’s a new day at the SEC, and a key priority of my chairmanship is developing a fit-for-purpose regulatory framework for crypto asset markets. Investors will benefit from these approvals, as they will make these products less costly and more efficient.”
The approvals cover a wide range of crypto ETFs, including funds from BlackRock, Ark21, Fidelity, Franklin Templeton, and VanEck.
All three major US exchanges—Nasdaq, NYSE Arca, and Cboe—received the green light to implement in-kind capabilities.
Jamie Selway, head of the SEC’s Division of Trading and Markets, called the decision “an important development” for issuers and market participants.
According to SoSoValue data, US spot Bitcoin ETFs have already drawn in over $54.9 billion in cumulative net inflows and hold nearly $153 billion in total assets.
Ethereum ETFs, which went live more recently, are also gaining ground.
BlackRock’s ETHA is leading the pack with US spot ETH ETFs now holding $21.5 billion in assets, backed by $9.4 billion in inflows.
The addition of in-kind functionality is expected to accelerate both asset growth and investor participation.
Analysts suggest this structural change could help push total assets across US Bitcoin and Ether ETFs into the trillion-dollar range in the near future.
The SEC didn’t stop at in-kind approvals.
It also cleared applications for several new offerings, including a hybrid Bitcoin-Ethereum fund, options on selected spot Bitcoin ETFs, and increased position limits of up to 250,000 contracts on Bitcoin-based options.
The agency also requested public input on delegated approvals for two upcoming large-cap crypto ETPs, signalling more developments could follow.
James Seyffart of Bloomberg Intelligence noted that future crypto ETFs—especially those tied to altcoins—are now more likely to launch with in-kind features from day one.
By aligning crypto ETFs with traditional ETP structures, the SEC has made it easier for institutional capital to flow into digital assets without unnecessary cost or risk.
The move is not just about efficiency—it’s about giving crypto a seat at the table.
And with the biggest players in finance now better equipped to handle digital assets, the next phase of crypto’s evolution may be defined less by volatility and more by stability, liquidity, and long-term growth.
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