What happened?
The US Securities and Exchange Commission (SEC) approved changes allowing crypto exchange-traded products (ETPs) to use in-kind creations and redemptions. This means authorized participants can directly receive underlying cryptocurrencies like Bitcoin and Ether rather than using cash. The decision aims to make the market for crypto ETFs more efficient and cost-effective.
Who does this affect?
This decision primarily affects authorized participants, fund issuers, and institutional investors dealing with crypto ETPs. It provides them greater flexibility and potential tax efficiency by allowing direct cryptocurrency transfers. Additionally, it impacts the broader financial market as the SEC’s approval may encourage more entities to engage in the crypto ETF space.
Why does this matter?
The SEC’s move is significant because it aligns crypto ETFs more closely with traditional ETFs, potentially increasing their appeal to investors. By easing operational constraints, it could lead to tighter spreads, enhanced liquidity, and increased participation from cautious institutional investors. The change may accelerate the growth of assets under management in the crypto ETF sector, which has already seen substantial growth since 2024.