On July 29, 2025, the Securities and Exchange Commission (SEC) signaled a significant policy shift, approving orders that permit in-kind creations and redemptions for crypto asset exchange-traded products (ETPs).[1] This marks a departure from the SEC’s prior approach, which limited spot bitcoin and ether ETPs to in-cash creations and redemptions. Under the new orders, bitcoin and ether ETPs can operate consistent with other commodity-based ETPs because authorized participants (APs) can create and redeem shares using the underlying crypto assets rather than cash.
In-Kind Creations and Redemptions
In-kind creations and redemptions refer to the process by which APs (typically large broker-dealers) can exchange the underlying assets of the ETP—such as bitcoin or ether—directly for shares of the ETP, and vice versa.
In-Kind Creation: An AP delivers the underlying crypto assets to the ETP issuer (“Issuer”) in exchange for newly created shares of the ETP.
In-Kind Redemption: An AP returns shares of the ETP to the Issuer and receives the underlying crypto assets in return.
Conversely, if creations and redemptions can only be made in cash, APs must use cash to create or redeem ETP shares, and the Issuer is responsible for buying or selling the underlying assets in the market. The newly approved in-kind approach is expected to reduce costs and increase efficiency for Issuers, APs, and investors, and align the regulatory treatment of crypto asset ETPs with established practices for traditional commodity-based ETPs.
Response from SEC Leadership
SEC Chairman Paul S. Atkins remarked that this change reflects the SEC’s commitment to developing a “fit-for-purpose regulatory framework” for crypto assets. Jamie Selway, Director of the Division of Trading and Markets, noted that “in-kind creation and redemption provide flexibility and cost savings” to Issuers, APs, and investors, “resulting in a more efficient market.”
In a separate statement, SEC Commissioner Mark Uyeda echoed these remarks and added that in-kind redemptions will “enable ETPs to access tools for managing exposure more cheaply, more transparently, and with better alignment to how asset managers and investors use ETPs in other markets.”[2]
Additional Measures
The SEC also approved measures to advance what it referred to as a “merit-neutral approach” to review exchange applications seeking to list and trade certain mixed spot bitcoin and spot ether ETPs, options on certain spot bitcoin ETPs, Flexible Exchange (FLEX) options on shares of certain bitcoin ETPs, and an increase of position limits for listed options on certain bitcoin ETPs. The SEC also issued scheduling orders to solicit public comment on proposals to list and trade two large-cap ETPs.
Conclusion
Overall, this represents another move by the SEC toward a more standardized regulatory environment for crypto-based products, further aligning them with traditional commodity-based counterparts.
Related Client Alerts
- SEC Staff Offers Guidance on Disclosure Requirements for Crypto Asset Exchange-Traded Products
- SEC Concludes Certain Protocol Staking Activities Are Not Securities Offerings
[1] See SEC Permits In-Kind Creations and Redemptions for Crypto ETPs (July 29, 2025).
[2] See Statement on the Commission’s Approval of In-Kind Creations and Redemptions for Crypto Exchange-Traded Products (July 29, 2025).