Crypto Exchange Traded Products (ETPs) now offer in-kind creation and redemption processes, significantly expanding the market for these digital assets

Crypto Exchange Traded Products (ETPs) now offer in-kind creation and redemption processes, significantly expanding the market for these digital assets

The U.S. Securities and Exchange Commission (SEC) has made a significant move in the cryptocurrency market by allowing authorized participants to create and redeem crypto exchange-traded product (ETP) shares directly with the underlying assets. This decision will make crypto ETPs more efficient, cost-effective, and transparent.

The approval orders, as stated by the SEC, will allow bitcoin and ether ETPs to create and redeem shares on an in-kind basis, similar to other commodity-based ETPs approved by the Commission. This process, known as in-kind creation and redemption, exchanges ETF shares for the underlying assets (like bitcoin and ether), reducing costs and improving tax efficiency.

Gabor Gurbacs, founder of Pointsville and formerly manager of VanEck's digital asset initiatives, noted that this decision is a significant development as it allows large firms to handle and accumulate physical Bitcoin. Jamie Selway, Director of the Division of Trading and Markets, echoed this sentiment, stating that the Commission's decision is an important development for the growing marketplace for crypto-based ETPs.

The SEC's decision aligns crypto ETPs with traditional commodity-based ETPs, enhancing price tracking by keeping the ETF price closer to the asset price. It also provides flexibility and cost savings for issuers, market participants, and investors. SEC Chairman Paul Atkins emphasized that this change supports a more efficient market and contributes to building a rational regulatory framework tailored for crypto asset markets.

Bitwise, the digital asset investment firm, concluded that the SEC's decision is another significant milestone in a big year for the crypto space. Joe Consorti, head of growth at Theya (YC), a bitcoin self-custody solution, and institutional lead at The Bitcoin Layer, also expressed his support for the decision.

Eric Balchunas, senior ETF analyst at Bloomberg, predicted that the SEC's decision could potentially lead to an explosion of option-based bitcoin ETFs. Gregory Xethalis, general counsel of Multicoin Capital Management, also made a statement regarding the SEC's decision.

The SEC has also approved other orders that advance a merit-neutral approach to crypto-based products, including exchange applications seeking to list and trade an ETP that would hold mixed spot bitcoin and spot ether. Bitwise added that the SEC's decision brings spot crypto ETPs closer to traditional asset ETPs and ETFs, which have been doing in-kind transactions for decades.

In conclusion, the SEC's decision to permit in-kind creations and redemptions for crypto asset ETPs is a positive step towards a more efficient and transparent cryptocurrency market. This decision will benefit investors and contribute to the growth of the crypto marketplace.

Investors can now benefit from the increased efficiency of investing in cryptocurrency through exchange-traded products (ETPs), as the SEC has approved the use of in-kind creation and redemption for bitcoin and ether ETPs, similar to other commodity-based ETPs. This move aligns crypto ETPs with traditional asset ETPs, providing flexibility and cost savings for issuers, market participants, and investors.

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