The U.S. Securities and Exchange Commission (SEC) may soon allow Bitcoin ETFs to use in-kind processes for their operations. This change could simplify the creation and redemption process.
Changes in ETF Creation Process
The SEC may allow ETFs to transfer Bitcoin directly when investors enter or exit. This would enable ETF sponsors to avoid selling coins on the spot market and passing cash to investors. Commissioner Hester Peirce confirmed that the SEC has received several Form 19b-4 filings, including from Nasdaq and BlackRock, which are currently going through the review process.
Benefits of Using In-Kind Mechanisms
Shifting to an in-kind mechanism could reduce trading costs and lessen market impact. Bloomberg Intelligence analyst James Seyffart noted that funds could trade more smoothly with fewer slippages. It would also help sponsors avoid the need to liquidate large Bitcoin blocks in volatile market conditions.
Future of Bitcoin ETFs and Regulation
Since the Trump administration showed more openness to crypto products, the SEC has also been more favorable to filings for ETFs tracking other tokens. If the SEC adopts in-kind processes, ETF structures would align more closely with traditional markets, potentially attracting new capital and enhancing the efficiency of large institutional flows.
Future regulatory changes, if implemented, could transform the Bitcoin market, integrating digital assets with traditional financial systems.
