The U.S. Securities and Exchange Commission (SEC) has made a groundbreaking decision in the digital asset space, officially allowing Bitcoin and Ethereum ETFs to implement “in-kind redemption,” enabling the conversion of ETF shares into actual cryptocurrency assets.
On July 29, 2025 (U.S. time), the SEC announced that all approved Bitcoin and Ethereum ETFs can now convert ETF shares into physical BTC and ETH. Major exchanges listing cryptocurrency ETFs, such as Nasdaq, NYSE, and Cboe, are required to complete the two-way conversion process between ETF shares and these top cryptocurrencies.
Paul Atkins, the newly appointed SEC Chairman, made significant remarks regarding this decision:
“One of my focuses during my term is to establish a regulatory framework that aligns with the realities of the digital asset market. I am pleased to announce that the commission has approved the request for conversion between ETF shares and the underlying assets.”
Atkins emphasized, “Investors will benefit from this decision, as it makes investment products less costly and more efficiently traded. This decision continues the process of building a regulatory corridor for crypto, creating a dynamic and deep market that brings substantial benefits to the American public.”
Previously, crypto ETF issuers had repeatedly proposed allowing in-kind conversions to the SEC but had not received approval.
Old Issues: When investors wanted to liquidate their funds, issuers had to:
- Move Bitcoin from the storage wallet
- Sell Bitcoin on the market
- Transfer cash to the investor’s account
Limitations of the Old Method:
- Restricted investor options
- Long waiting periods
- Losses due to slippage when selling BTC/ETH
This new solution allows investors to receive Bitcoin or Ethereum directly instead of cash, saving costs and time.
The decision applies only to licensed market participants, including:
- Institutional investors
- Market makers
- Not applicable to individual investors
James Seyffart, an ETF analyst at Bloomberg, predicts that future altcoin ETFs will also benefit from this change and may implement share conversions to altcoins as soon as they are approved.
With this decision, the U.S. Bitcoin and Ethereum ETF market is entering a new phase of development, promising practical benefits for investors and fostering the maturation of the digital asset industry.
