The US Securities and Exchange Commission has officially approved permit in-kind redemptions for Bitcoin (BTC) and Ethereum (ETH) Exchange-Traded Funds (ETFs), making things easier for institutions and investors. Reportedly, crypto experts have been actively pushing for the adoption of in-kind redemptions.
For SEC Chair Paul Atkins, the approval for in-kind redemption “continues to build a rational regulatory framework for crypto, leading to a deeper and more dynamic market.”
SEC Commissioner Hester Peirce welcomes this fruitful decision of the SEC, saying, the new feature is something that ETP sponsors and investors wanted since the initial approvals of crypto-assets ETPs.
An official SEC statement read that the commission also voted to enable other orders that advance a merit-neutral approach to crypto-based products. This includes exchanges seeking to list and trade an ETP that would carry mixed spot Bitcoin and spot Ethereum, options on spot BTC ETPs, and more.
What is in-kind redemption?
Earlier, when big institutional investors wanted to redeem shares of ETFs, they received cash instead of the underlying assets. However, as the SEC waved green light, investors can now receive the underlying assets like Bitcoin or Ethereum, which is called in-kind redemptions. So, now, if investors want to sell their ETFs and get crypto instead of cash, they can just go for it!
Why does in-kind redemption matter?
Efficient conversion and lower cost are major benefits of in-kind redemption. Institutions do not have to liquidate ETF shares for cash, reducing arbitrage delays and making trades smoother. Selling ETFs for cash will incur trading fees, as investors should sell them on an exchange. When receiving crypto assets, investors receive them directly without causing any payments. Moreover, this new feature can make ETFs closely track the price of actual crypto, leading to better ETF performance.
Who can benefit from in-kind redemption?
Institutional investors, authorized participants like institutions and market makers, retail investors, and ETF issuers can take advantage of in-kind redemption.
The SEC’s recent crypto-friendly approach happened as the pro-crypto ideology of US advances. The commission has eased several cases against several crypto exchanges, such as Coinbase and Ripple, that were imposed during the previous administration. The legal body has also reversed SAB 121 Guidance, inviting banks to hold cryptocurrencies. As regulatory bodies and the government work closely to create a crypto-progressive ambience, more crypto companies, institutions, and investors are finding their position in the region.
