SEC Approves In-Kind Creations for Bitcoin and Ethereum ETFs

The U.S. Securities and Exchange Commission (SEC) has officially approved in-kind creations and redemptions for two crypto exchange-traded products (ETPs), a move that could significantly expand investor access to digital asset ETFs on regulated exchanges.

Under the new framework, investors can exchange actual Bitcoin or Ether for ETF shares—and redeem shares for the underlying assets—aligning these funds with operational models already used for commodity ETPs. The SEC says this change creates consistency across derivative-based products, leveling the playing field for crypto ETFs.

SEC Chairman Paul S. Atkins stated on X, “I am pleased the Commission approved these orders permitting in-kind creations and redemptions for a host of crypto asset ETPs. Investors will benefit from these approvals, making these products less costly and more efficient.”

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Jamie Selway, Director of the SEC’s Division of Trading and Markets, also welcomed the decision, calling it a “positive development” that adds flexibility and can reduce investor costs.

The ruling comes after months of lobbying from major issuers like BlackRock, Fidelity, and Grayscale, who pushed for traditional fund structures for spot crypto ETFs. It also follows the SEC’s recent request for public comment on Nasdaq’s filing for staking options on BlackRock’s spot Ethereum ETF—signaling growing openness to advanced crypto features.

SEC Expands Crypto ETF Options and Raises Position Limits

Alongside the in-kind approval, the SEC cleared a new model for trading options on spot Bitcoin ETFs. This includes FLEX options and customizable derivatives, giving market participants more control over contract terms like strike prices, expiration dates, and exercise styles.

In a major boost for liquidity, the SEC raised the position limit for Bitcoin ETF options from 25,000 to 250,000 contracts—expected to draw greater institutional participation. Bloomberg ETF analyst Eric Balchunas called the move “huge,” with ETF issuers predicting a surge in option-based Bitcoin ETF products.

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Analysts See Path Toward Altcoin ETFs

Industry experts say the decision marks a pivotal step toward deeper integration of crypto into traditional finance. Bloomberg’s James Seyffart noted that approving in-kind processes for Bitcoin and Ethereum ETFs could pave the way for altcoin ETFs—such as Solana, Avalanche, or Cardano—equipped with similar features from launch.

The approval aligns with broader political and regulatory momentum, including the recently signed Genius Act by President Donald Trump, which promotes modernized financial regulations and technology-driven policy.

With in-kind creations now live, ETFs can better track the real-time value of their underlying crypto assets, offering investors tighter bid-ask spreads, lower costs, and improved price transparency.