The Securities and Exchange Commission (SEC) has approved the use of all SPOT Bitcoin (BTC) and Ethereum (ETH) Exchange-Traded Funds (ETF) in-kind creation and redemption processes, indicating a major shift in regulatory approaches to digital assets under new leadership.
This decision will allow accredited participants expanding institutional investors promoting ETF liquidity to create and redeem ETF shares directly in BTC or ETH, rather than using cash. This mechanism is widely seen as more efficient and safe as it allows for close tracking of investor demand and adjusting ETF stock supply in real time without the need to travel back and forth of assets to the FIIAT currency.
This marks the SEC’s first major crypto-friendly policy move since Paul Atkins was appointed agency chair earlier this year. A former SEC committee member known for his market-friendly views, Atkins has long advocated for a more open regulatory approach to digital assets.
“‘This is a new day with the SEC,” Atkins said in a press release. “My Chair’s key priority is to develop an appropriate regulatory framework suitable for the cryptocurrency market,” he continued. Investors benefit from these approvals. These products make these products lower and more efficient. ”
The shift comes after BlackRock granted iShares Bitcoin Trust (IBIT) in January to submit requests after being immediately followed by other publishers, including Fidelity and Ark Invest.
Until now, all approved Spot Bitcoin ETFs (SEC was first Green Rat in January 2024) were permitted to operate only with cash works and redemptions. That requirement added operational complexity and was widely seen as a barrier to the efficiency of institutional market makers.
The SEC has also approved an increase in position limits for options trading at IBIT. This is a move that allows traders to hold larger options positions tied to the fund.
Location limits are regulatory caps that limit options contracts that traders or institutions can control with a single security, preventing market manipulation and excessive risk. By increasing these restrictions, the SEC is showing comfort more comfortable with the liquidity and maturity of the Bitcoin ETF market, giving institutional investors the flexibility to hedge or express the fund’s performance.
This change could significantly increase institutional participation in both ETF groups by reducing friction in arbitrage and hedging strategies.
The SEC’s decision highlights the growing motivation under Atkins’ leadership in dealing with crypto assets within the same regulatory framework applied to traditional markets.
