A Back-End Upgrade, Not a Front-End Revolution
The U.S. Securities and Exchange Commission (SEC) voted on a structural adjustment allowing crypto ETFs to support in-kind creations and redemptions — a back-end upgrade that serves institutional activity over retail availability, according to experts.
Rather than trading in cash for ETF shares, asset managers can now trade actual Bitcoin (BTC) or Ether (ETH) directly for ETF shares. The mechanism reduces conversion costs, enhances accuracy in pricing, and streamlines business activities for ETF providers.
Bloomberg’s Eric Balchunas referred to it as “a plumbing fix,” insisting that it doesn’t change how individual investors engage with crypto funds. “This does not mean retail can swap IBIT for actual bitcoin,” he further added.
Bitwise Pioneers the Way
Bitwise Asset Management was the initial U.S. issuer to roll out in-kind redemptions following the SEC’s July 29 ruling. The firm said that both of its Bitcoin and Ether ETFs would begin to offer this structure simultaneously.
“It just makes the pipes a little better,” Balchunas added. Previous SEC leadership, including Gary Gensler, had opposed in-kind models because of perceived risks around where the crypto assets came from.
Toward Traditional Market Parity
The structural upgrade brings crypto ETFs more in line with the structure of traditional exchange-traded products. Bitwise President Teddy Fusaro stated that it puts crypto funds in line with institutional-grade ETF structure.
21Shares’ Federico Brokate referred to the move as fundamental to further integration between crypto and the mainstream financial system.
ETFs Keep Adding Up Bitcoin
The SEC decision comes on the heels of continuous growth in crypto ETF holdings. As of July 31, U.S. Bitcoin ETFs collectively hold over 1.29 million BTC — approximately 6.18% of circulating supply.
BlackRock’s iShares Bitcoin Trust leads the pack with 740,601 BTC worth nearly $88 billion. Fidelity’s fund is second with over 205,000 BTC, with Bitwise holding over 40,000 BTC in its ETF.
