In a significant move for the US digital asset sector, the Securities and Exchange Commission (SEC) under Chairman Paul Atkins has authorized in-kind redemption mechanisms for both Bitcoin and Ethereum ETFs. This long-awaited regulatory update aligns the handling of crypto index funds with the operational practices of traditional equity and commodity ETFs.

For the first time, institutional participants can now create and redeem ETF shares directly using BTC or ETH, eliminating the need for cash conversions. This operational upgrade is seen as a catalyst for greater efficiency in the crypto ETF market, enabling market makers and authorized participants to serve investor demand more precisely and manage ETF supply in real-time—without reliance on fiat currency transactions.

Paul Atkins: "A New Day at the SEC"

SEC Chair Paul Atkins emphasized the strategic importance of this rule change, stating: “It’s a new day at the SEC, and one of my top priorities is building a pragmatic regulatory framework for crypto asset markets. I’m pleased that the SEC has approved orders that allow the creation and redemption of a variety of crypto ETPs using in-kind settlements. Investors will benefit through reduced costs and greater efficiency.”

Until now, all approved US spot crypto ETFs operated under a cash-only creation and redemption model, which many saw as an obstacle to optimal market efficiency—especially for institutional market-makers. The introduction of in-kind redemption is widely regarded as a step toward bringing crypto ETF operations in line with global best practices for exchange-traded products.

Implications for the Global Crypto ETF Market

The record-breaking capital inflows into US Bitcoin and Ethereum ETFs over the past year have put pressure on regulators globally to modernize their approach to digital assets. According to Przemysław Kral, CEO of zondacrypto, “The sheer volume and investor attention these ETFs have generated have forced regulators worldwide to take digital assets seriously, while also lowering barriers for retail investors.”

While recent days have seen a slight pullback in Bitcoin ETF demand, total volume for 2025 remains at all-time highs, signaling persistent institutional and retail interest in digital asset investment vehicles.