The U.S. Securities and Exchange Commission (SEC) has approved the use of creation and redemption mechanisms for Bitcoin and Ethereum ETPs, which will significantly impact market efficiency.
Benefits for Institutional Investors
The new rule directly affects institutional investors by improving liquidity and lowering costs. Inflows from institutional investors are expected to increase, enhancing the involvement of major issuers like BlackRock in the market.
Historical Context and Efficiency
Historical trends indicate that creation and redemption mechanisms in traditional commodity ETFs have boosted market efficiency. This policy change is likely to further apply these benefits within the crypto-assets market.
SEC Response and Expert Opinions
SEC Chairman Paul S. Atkins remarked, "It's a new day at the SEC, and a key priority of my chairmanship is developing a fit-for-purpose regulatory framework for crypto asset markets. I am pleased the Commission approved these orders permitting in-kind creations and redemptions for a host of crypto asset ETPs." Experts note that reducing friction through in-kind mechanisms could significantly increase institutional involvement.
The SEC's approval of creation and redemption mechanisms for crypto ETFs represents a significant shift that could benefit the market and increase interest from institutional investors.
