SEC Greenlights In-Kind Creations for Spot Crypto ETFs—A Watershed Moment for Digital Assets

The SEC just ripped up the old rulebook—spot crypto ETFs can now create and redeem shares using actual bitcoin instead of cash. Game on.

Wall Street's new crypto playground

Fund providers no longer need to liquidate holdings for cash redemptions, slashing operational friction (and giving traditional finance another way to pretend they invented blockchain). The move signals regulators might—finally—be catching up to market realities.

Brace for impact

Expect massive liquidity inflows as institutional players dive in. The approval could trigger the next crypto bull run—or at least give bankers fresh ammo for their 'digital asset strategy' PowerPoints.

Funny how these 'revolutionary' products always arrive just in time for Wall Street to monetize the revolution.

In-kind Redemptions

This essentially means that shares of exchange-traded products are created and destroyed using the actual underlying assets (BTC and ETH) rather than cash.

The new method eliminates trading fees from buying and selling crypto on exchanges, and reduces bid-ask spreads (the difference between buying and selling prices).

It leads to greater efficiency through a faster process, eliminating the need to execute trades on exchanges, more precise holdings with exact amounts of crypto being transferred, and improved price tracking, as the ETF price remains closer to the actual asset price.

SEC Chairman Paul Atkins said, “I am pleased the Commission approved these orders permitting in-kind creations and redemptions for a host of crypto asset ETPs. Investors will benefit from these approvals, as they will make these products less costly and more efficient.”

Meanwhile, Jamie Selway, Director of the Division of Trading and Markets, added:

“The Commission’s decision today is an important development for the growing marketplace for crypto-based ETPs. In-kind creation and redemption provide flexibility and cost savings to ETP issuers, authorized participants, and investors, resulting in a more efficient market.”

“It’s not a huge impact to retail, but more of a plumbing fix. It just makes the pipes a little better,” commented Eric Balchunas.

The approval of in-kind reations and redemptions has been long-awaited by ETF participants and industry experts. Staking is the next big thing in line for the SEC to approve for crypto ETFs.

“My guess? This is next on the SEC’s hit list. Sooner rather than later,” said ETF expert Nate Geraci.

One item left on my checklist from November…

Staking in spot ETH ETFs.

Today, SEC acknowledged Nasdaq 19b-4 for staking in iShares ethereum ETF.

My guess? This is next on SEC’s hit list.

Sooner rather than later.

Before any addn’l spot crypto ETFs. https://t.co/40brAYlrI0

— Nate Geraci (@NateGeraci) July 30, 2025

More SEC Approvals

The regulator also approved several other crypto-related products, including ETFs holding mixed Bitcoin and Ether, options on spot Bitcoin ETFs, and Flexible Exchange (FLEX) options on Bitcoin ETP shares.

Meanwhile, spot Ether ETFs have seen their 18th straight day of inflows and a total of $5.4 billion in new capital, Geraci reported on Wednesday.