TLDR:
- SEC now allows in-kind creations for crypto ETFs, removing a major cost and speed barrier.
- Market makers can transfer Bitcoin or Ether directly, eliminating mandatory cash conversions.
- The change improves pricing efficiency and aligns crypto ETFs with commodity-based funds.
- Analysts say this could draw major institutional investors seeking lower costs and better liquidity.
The SEC has lately removed one of the biggest roadblocks for crypto exchange-traded products. It now allows in-kind creations and redemptions. This means market makers can move crypto directly, instead of converting everything into cash.
The change makes crypto ETFs cheaper, faster, and closer to their true value. For many, it is the step that unlocks the next phase of ETF growth.
SEC Rule That Reshapes How ETFs Work
The SEC confirmed its decision in a July 29 order. Crypto ETFs can now let authorized participants deposit or redeem actual crypto.
Before this, they had to use cash. That process slowed trading and drove up costs. Paul Atkins, the SEC chair, said the new rule is designed to bring crypto ETFs in line with other commodity-based funds.
MartyParty, a crypto analyst, called this the “final holdup” for the ETF market. He explained that in-kind transactions fix pricing gaps between ETF shares and the underlying crypto.
Breaking: #SEC gives the green light for crypto ETPs to allow in kind creation and redemptions.
IMO: This was the final holdup – we should see a lot of crypto ETF movement going forward.
This means market makers can use actual crypto assets to interact with the funds and ETF… pic.twitter.com/2zlXiv2sDf
— MartyParty (@martypartymusic) July 29, 2025
When prices drift, large financial firms can deliver Bitcoin or Ether directly to the fund or pull it back out. That keeps the ETF trading where it should be. It also cuts the need for extra conversions, which often hurt investors.
Impact on Costs and Liquidity
The SEC noted that this change will make ETFs more efficient. In-kind transactions remove layers of cash handling and settlement.
That means lower costs for issuers and better liquidity for traders. It also improves tax efficiency in some markets, a point ETF specialists say could draw in larger institutional investors.
Alongside this decision, the SEC also approved other pending crypto-related orders. These include options for Bitcoin ETFs and plans for mixed Bitcoin-Ether products.
The move shows a clear shift toward treating crypto ETFs like any other exchange-traded commodity. For traders, it may be the sign they have been waiting for: a cleaner, cheaper, and more direct way to get crypto exposure.
