The U.S. Securities and Exchange Commission (SEC) has officially approved a major change in how crypto ETFs operate. On Tuesday, the SEC announced it will now allow in-kind creation and redemption for exchange-traded products (ETPs) tied to Bitcoin and Ethereum.

This change means authorized participants can now exchange ETF shares directly for crypto assets like BTC and ETH instead of cash—offering more flexibility, efficiency, and potential cost savings.

What Are In-Kind Redemptions?

Previously, crypto ETFs in the U.S. could only process redemptions in cash. Now, with in-kind redemptions, ETF issuers can give investors actual crypto tokens rather than selling them for cash on the open market. This avoids extra fees and helps prevent market impact from large sell orders.

Jamie Selway, Director of the SEC’s Division of Trading and Markets, said the new process “provides flexibility and cost savings to ETP issuers, authorized participants, and investors, resulting in a more efficient market.”

SEC Takes a More Crypto-Friendly Stance

SEC Chairman Paul Atkins called the approval a sign of progress. “It’s a new day at the SEC,” he said, emphasizing his commitment to building a regulatory system that fits the unique needs of digital assets.

This shift aligns with the pro-crypto momentum coming from both regulators and lawmakers. Recent congressional support—including three major bills covering stablecoins, market structure, and anti-CBDC protections—shows growing interest in fostering innovation rather than restricting it.

Growing Demand for Crypto ETFs

The market response has been positive. U.S. spot Bitcoin ETFs have now seen 12 straight days of inflows, bringing in $6.6 billion in recent weeks. Combined, U.S.-listed Bitcoin ETFs now hold over 1.298 million BTC, valued at approximately $152 billion, according to Bitbo.

Ethereum ETFs are also gaining traction. BlackRock’s iShares Ethereum ETF recently surpassed $10 billion in assets in just 251 days—ranking as the third-fastest ETF to hit that milestone in U.S. history.

Why It Matters

The move to allow in-kind redemptions could make crypto ETFs more appealing to large institutions and retail investors alike. It reduces costs, increases transparency, and may even improve market liquidity by avoiding unnecessary asset sales.

With regulators showing more openness and investors pouring in billions, the future of crypto ETFs in the U.S. looks stronger than ever.