SEC Approves In-Kind Redemptions for Bitcoin and Ethereum ETFs in Major Shift

SEC approves in-kind redemptions for Bitcoin and Ethereum ETFs, enhancing efficiency and attracting institutional investors.

Fridah Kangai
July 31, 2025
2:00 pm

Fridah Kangai

Fridah Kangai is a dedicated crypto journalist with a sharp eye for market trends, blockchain innovation, and digital asset movements. She specializes in breaking down complex topics into clear, engaging stories for both seasoned investors and curious newcomers. With a passion for decentralization and a pulse on the ever-evolving crypto space, Fridah delivers timely, accurate, and insightful coverage. Her work bridges the gap between technology and everyday understanding in the world of cryptocurrency.

SEC approves in-kind redemptions for Bitcoin and Ethereum ETFs.
ETF investors can now exchange crypto directly, reducing costs.
Position limits expanded for Bitcoin options to boost liquidity.

U.S. Securities and Exchange Commission has approved in-kind redemptions for Bitcoin and Ethereum ETFs. The regulatory agency officially recorded this decision in an order released on July 29.

The authorization enables the market players to sell true Bitcoin or Ether in exchange for ETF shares. It has now become possible to redeem ETF shares for physical crypto rather than cash, which lowers overdependence on middlemen.

All ETF issuers listed on Nasdaq, NYSE Arca, or Cboe BZX will be involved in this new way of working. BlackRock, Fidelity, Ark21, VanEck, and Franklin Templeton are major fund managers that are under this approval.

According to SEC Chairman Paul S. Atkins, the change would enhance the funds’ efficiency and help lower transaction-related expenses. He added that the structure would also enhance tax benefits for long-term holders of ETFs.

I'm pleased to share the SEC approved in-kind creations and redemptions for crypto ETPs. The approvals continue to build a rational regulatory framework for crypto, leading to a deeper and more dynamic market, which will benefit all American investors. https://t.co/UbQ9pXlBpD pic.twitter.com/DX8ub16Ey3
— Paul Atkins (@SECPaulSAtkins) July 29, 2025

The funds’ operation will now be similar to that of a commodity ETF, which is asset-based, such as a gold—or silver-based ETF. This advancement brings crypto ETFs closer to the regulatory viewpoint of traditional commodity funds.

Also Read: Bitmain Set to Launch First U.S. Factory Amid Crypto Mining Boom

In-Kind Model Brings Operational Benefits and Boosts Institutional Confidence

Spot crypto ETFs have recently expanded rapidly and hold an estimated $150 billion of assets across multiple providers. This model of in-kind makes the compensation procedure easy and saves the expenses connected to traditional cash-based compensation.

Institutional investors are likely to enjoy the advantages of enhanced efficiency and reduced execution risks of their ETF trades. Besides, the model offers greater flexibility and orientation towards the functioning of other asset-backed ETFs.

Another modification enacted by the SEC concerns Bitcoin ETF options. To enhance liquidity in the options market, position restrictions on options were increased to 250,000 contracts per fund as opposed to 25,000.

SEC also approving increasing the position limit of options on $IBIT to 250,000 from 25,000 so 10x increase. Also approving use of FLEX options. pic.twitter.com/NpnxE4ecYb
— Eric Balchunas (@EricBalchunas) July 29, 2025

At the same time, limit expansion and FLEX options came into play, in which investors could tailor the terms of a contract to their strategies. This ruling prepares the way for further advanced and resizable trading simulations within licensed markets.

BlackRock has already amended its filing to reflect the in-kind model and acquired $18.9 million in Ethereum. When in-kind handling becomes the norm in the industry, other providers of ETFs are anticipated to follow suit.

The SEC’s approval significantly changes the construction and mechanism of crypto ETFs. It introduces higher efficiency, cost optimization, and deeper institutional involvement in digital asset investment products.

Also Read: ETH Strategy Raises $46.5M to Offer Leveraged ETH Gains Without Liquidations