The SEC’s recent rule change permits crypto ETFs to exchange Bitcoin and Ether directly for fund shares, enhancing operational efficiency and lowering costs without altering retail investor experience.
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SEC allows in-kind creations and redemptions for crypto ETFs, enabling direct token-for-share swaps.
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This structural upgrade reduces conversion fees and tightens ETF price spreads.
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Bitwise is the first to implement this change, signaling growing institutional adoption.
SEC’s crypto ETF rule change boosts efficiency by enabling direct Bitcoin and Ether swaps, reducing costs for investors. Discover how Bitwise leads this shift.
How Does the SEC’s Rule Change Improve Crypto ETF Operations?
The SEC’s new rule allows asset managers to perform in-kind creations and redemptions, swapping Bitcoin and Ether tokens directly for ETF shares instead of cash. This change eliminates conversion fees and enhances pricing accuracy, making crypto ETFs more cost-efficient and operationally streamlined for investors.
What Impact Does In-Kind Creation Have on Retail Investors?
Despite the operational benefits, this rule does not change how retail investors interact with crypto ETFs. According to industry experts, including Bloomberg’s Eric Balchunas, the update is a “backend plumbing fix” that improves institutional processes but does not enable retail investors to exchange ETF shares for actual cryptocurrencies directly.
Source: Eric Balchunas
Which Crypto Funds Are Leading Adoption of the New Structure?
Bitwise Asset Management became the first US crypto fund to implement in-kind creations and redemptions following the SEC’s July 29 ruling. Their Bitcoin (BTC) and Ether (ETH) ETFs now operate under this more efficient framework, signaling a shift towards greater institutional integration and operational sophistication in the crypto ETF market.
How Does This Align Crypto ETFs with Traditional Financial Products?
The update aligns crypto ETFs with traditional exchange-traded products by using the same foundational mechanisms for creations and redemptions. Bitwise President Teddy Fusaro emphasized that this move places crypto funds on “the same foundation” as traditional ETFs, fostering deeper integration between digital assets and the established financial system.
What Is the Current State of US Bitcoin ETF Holdings?
US Bitcoin ETFs continue to accumulate significant Bitcoin holdings. Data from Bitbo shows that 12 US Bitcoin ETFs collectively hold 1,299,401 BTC, representing 6.18% of the total 21 million Bitcoin supply. This growing institutional demand underscores the increasing acceptance of Bitcoin within regulated financial products.
US crypto ETFs as of July 31, 2025. Source: BitBO
Which Funds Hold the Largest Bitcoin Shares?
The iShares Bitcoin Trust leads with 740,601 BTC valued at approximately $87.66 billion. Fidelity’s Wise Origin Bitcoin Fund holds 205,864.2 BTC (~$24.37 billion), while Bitwise’s Bitcoin ETF holds 40,638.7 BTC, worth about $4.81 billion. These figures highlight the dominant players shaping the US crypto ETF landscape.
Frequently Asked Questions
What changes does the SEC’s rule bring to crypto ETFs?
The SEC’s rule enables crypto ETFs to perform in-kind creations and redemptions, allowing direct token-for-share swaps. This improves operational efficiency and lowers costs but does not affect retail investors’ ability to redeem ETF shares for cryptocurrencies.
Can retail investors now exchange ETF shares for Bitcoin or Ether directly?
No, retail investors cannot directly exchange ETF shares for Bitcoin or Ether. The rule change primarily benefits institutional processes by enabling direct token swaps, enhancing fund efficiency without altering retail investor interactions.
Key Takeaways
- SEC Rule Change: Enables in-kind creations and redemptions for crypto ETFs, improving operational efficiency.
- Institutional Adoption: Bitwise leads with first implementation, signaling growing market maturity.
- Market Impact: US Bitcoin ETFs hold over 6% of total supply, reflecting strong institutional demand.
Conclusion
The SEC’s approval of in-kind creations for crypto ETFs marks a significant structural improvement, aligning digital asset funds with traditional financial products. While retail investor access remains unchanged, this development enhances fund efficiency and lowers costs, paving the way for deeper integration of cryptocurrencies into mainstream finance. COINOTAG will continue monitoring these evolving dynamics to keep readers informed.
