SEC’s Next Big Move: In-Kind Redemptions for Crypto ETFs?
Wed 23 Jul 2025 ▪
4
min read ▪ by
The SEC might finally be gearing up for a big change. Quite a lot of Bitcoin and Ethereum ETF issuers have recently updated their filings to incorporate in-kind redemptions. This could possibly be a game-changer, enhancing each the appeal and tax efficiency of those investment products.
Quick Overview
- Five major ETF issuers have revised their documentation to include in-kind redemptions, as Bloomberg analyst James Seyffart reports.
- This move indicates possible progress in talks with the SEC, which has been hesitant on account of regulatory concerns.
- In-kind redemptions permit investors to swap their ETF shares for the actual cryptocurrencies, potentially minimizing tax liabilities.
- The firms involved include Invesco Galaxy, Ark 21Shares, VanEck, WisdomTree, and Fidelity.
The SEC’s Warming Up to In-Kind Redemptions for Crypto ETFs
Bloomberg’s ETF expert James Seyffart has identified a big development in recent regulatory submissions.
Invesco Galaxy, Ark 21Shares, VanEck, WisdomTree, and Fidelity have all updated their Bitcoin and Ethereum ETF filings with the CBOE to incorporate this recent feature. This simultaneous motion is not only a coincidence.
According to Seyffart, “We are seeing positive indications that Bitcoin and Ethereum ETFs may soon be able to perform in-kind creation and redemption transactions.”
This alignment likely indicates that discussions with the Securities and Exchange Commission have progressed, despite their previous reluctance on this issue.
In-kind redemptions could possibly be a pivotal factor for institutional investors. This mechanism allows them to directly receive the underlying assets, similar to Bitcoin or Ether, in exchange for his or her ETF shares, thus bypassing some capital gains taxes. It represents a chance for tax and operational efficiency that might considerably boost the attractiveness of crypto ETFs.
Since the approval of spot Bitcoin ETFs in January 2024, there’s been a gradual stream of requests for this feature. However, the SEC has been hesitant, citing security concerns and the complexity of implementing the mechanism.
Recent updates from issuers suggest that these technical barriers may soon be overcome.
The SEC’s Balancing Act: Regulatory Caution vs. Market Demand
Despite promising signs, the journey to approve in-kind redemptions is fraught with challenges.
The SEC has been postponing decisions, most recently delaying BlackRock’s iShares Ethereum ETF (ETHA) until August 26.
The agency’s hesitation stems from real technical issues. Direct crypto transfers pose several challenges, including secure management of personal keys, risk of cyberattacks, and transaction tracking. Regulators wish to ensure these risks are mitigated before proceeding.
Interestingly, while Donald Trump has publicly endorsed cryptocurrencies since his return to power, regulators under his administration remain cautious. Solana ETFs are still pending, and Ethereum staking is yet to receive the green light. This caution stands in contrast to the administration’s pro-crypto rhetoric.
Meanwhile, the market paints a special picture. On July 21, Bitcoin ETFs saw $131 million in net outflows, while Ethereum ETFs attracted $297 million, largely due to BlackRock and Fidelity.
Ultimately, this goes beyond technical hurdles. Approving in-kind redemptions would mark a big regulatory shift, paving the best way for a brand new generation of crypto ETFs tailored for institutional investors, offering tax advantages, security, and innovation. The big query stays: Will the SEC take this leap, or will it proceed to stall?
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I’m obsessed with Bitcoin and love exploring the intricacies of blockchain and cryptocurrencies, sharing my findings with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everybody, and I firmly imagine Bitcoin is the tool to make this possible.
DISCLAIMER
The views, thoughts, and opinions expressed in this text belong solely to the writer and mustn’t be taken as investment advice. Always do your personal research before making any investment decisions.
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