SEC Approves in-kind Creation and Redemption for Crypto ETPs, Marking Regulatory Shift

In a major development for the U.S. digital asset market, the Securities and Exchange Commission (SEC) has approved in-kind creation and redemption mechanisms for crypto asset exchange-traded products (ETPs), including those tied to Bitcoin and Ethereum.

This move represents a shift from earlier policies, which restricted such products to cash-only mechanisms for share issuance and redemption.

The new policy, approved on July 29, 2025, brings crypto ETPs in line with other commodity-based ETPs, such as those tracking gold or oil. Under the in-kind model, authorized participants can exchange actual crypto assets—rather than cash—for ETP shares. This model can reduce operational friction, lower costs, and improve liquidity for both issuers and investors.

SEC Chairman Paul S. Atkins framed the decision as a step toward a more “fit-for-purpose regulatory framework” for crypto. “Investors will benefit from these approvals, as they will make these products less costly and more efficient,” he said, calling the move part of a broader strategy to modernize oversight of the digital asset space.

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In addition to enabling in-kind settlements, the Commission approved multiple proposals to expand crypto investment tools, including:

• ETPs holding mixed spot Bitcoin and Ether
• Options and FLEX options on Bitcoin-based ETPs
• Increased position limits for options on BTC ETPs, up to 250,000 contracts

Jamie Selway, Director of the Division of Trading and Markets, emphasized that the updates “provide flexibility and cost savings,” promoting a more efficient and dynamic crypto market.

This sweeping policy change suggests growing SEC acceptance of crypto market maturity and investor demand for broader, more flexible products.

Kosta Gushterov

Kosta has been working in the crypto industry for over 4 years. He strives to present different perspectives on a given topic and enjoys the sector for its transparency and dynamism. In his work, he focuses on balanced coverage of events and developments in the crypto space, providing information to his readers from a neutral perspective.