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While the Wall Street regulator never explicitly banned in-kind redemptions, ETF sponsors were instructed to remove them from early filings. Spot BTC and ETH ETFs greenlighted by the Wall Street regulator early last year were limited to creations and redemption on an in-cash basis only, barring investors from directly exchanging shares of an ETF for its underlying crypto assets or vice versa.
Now, authorized participants (APs) can deliver or receive Bitcoin and Ether directly when issuing or redeeming shares. This setup is considered more efficient and less expensive as the issuers are not being forced to sell the tokens via a market maker and deliver fiat.
“It’s a new day at the SEC,” said Chairman Paul Atkins in a statement. “A key priority of my chairmanship is developing a fit-for-purpose regulatory framework for crypto asset markets. Investors will benefit from these approvals, as they will make these products less costly and more efficient.”
How SEC’s In-Kind Approval Will Reshape Crypto Market?
This shift reflects a wider industry trend toward more pro-crypto policy, primarily driven by the Trump administration’s commitment to supporting the growth of the nascent industry
 
Bloomberg ETF analyst Eric Balchunas noted in a post on X that the SEC’s “order granting accelerated approval” indicates a broader wave of ETF approvals. Balchunas now thinks more approvals are likely coming by early fall.
His colleague James Seyffart said the approval of in-kind redemptions sets the tone for what’s forthcoming, suggesting that future exchange-traded funds tracking other cryptocurrencies will likely allow in-kind creation and redemption from the get-go. “More movement in right direction IMO,” Seyffart added.
Source: https://zycrypto.com/sec-approves-in-kind-redemptions-for-all-bitcoin-and-ethereum-etfs-marking-major-regulatory-shift/