In a massive new update, the SEC approved in-kind ETFs for Bitcoin and Ethereum, as well as an expedited approval process for future altcoin products. This represents a significant breakthrough for the market sector.
Additionally, the Commission raised the position limit on IBIT options trading tenfold, potentially enabling “an explosion of option-based Bitcoin ETFs.”
In-Kind ETFs Win Approval
Since President Trump took office, a wave of pro-crypto regulations has swept through the US. However, one particular demand has picked up steam in the last few months: in-kind ETFs.
Today, the SEC announced its final approval of this request, and Chairman Paul Atkins released a statement on the issue.
So, what is an in-kind crypto ETF? When the first Bitcoin ETFs won approval under Gary Gensler, he aimed to cordon off these new products from potentially illicit BTC sources.
This meant forcing each issuer to buy the assets, and then investors would purchase the financial instruments.
Under an in-kind model, buyers can bring the relevant tokens to an issuer to get the products directly. That process describes in-kind creation, but the reverse also applies to redemptions.
Investors still need to do business through licensed issuers, but these issuers don’t need to buy all the tokens themselves.
In other words, in-kind crypto ETFs would remove yet another legal obstacle to Web3. Cryptoassets are theoretically treated like commodities, but most types of commodities have this in-kind functionality.
So far, this rule change has yielded a universally positive response.
To be clear, the SEC didn’t offer a blanket approval to any sort of in-kind crypto ETF. Instead, it gave a green light to three specific proposals, all of which deal with Bitcoin and Ethereum ETFs.
However, the Commission also mentioned an accelerated approval process, which may assist in-kind redemptions on altcoin products.
Additionally, the SEC is giving crypto ETFs another boon besides in-kind creation and redemption. ETF options trading is relatively new, especially for altcoins, but the Commission increased the position limit on IBIT options tenfold.
Already, ETF issuers are positively ecstatic about the new market opportunities.
All that is to say, the SEC is clearly in favor of crypto ETF liberalization despite recent approval delays. In-kind creation and redemption will put these products on the same level as any other commodity-based product.
Crypto ETF trade volumes are already high right now, but these new measures could send the momentum skyrocketing.
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