U.S. SEC Eases Rules for Bitcoin, Ether Funds in Shift From Cash-Only Model

The U.S. Securities and Exchange Commission on Monday approved new rules allowing authorized participants to create and redeem shares of crypto exchange-traded products (ETPs) using in-kind transfers of bitcoin and ether.

The decision departs from the cash-only requirement imposed on recently approved spot crypto funds and aligns crypto ETPs with other commodity-based products.

Bitcoin and Ether ETPs

With the change, issuers of bitcoin and ether ETPs can now manage share flows using the underlying digital assets directly, a structure that could lower operational costs and improve efficiency.

The policy update comes months after the SEC approved a wave of spot bitcoin and ether ETFs, all of which were restricted to using cash for creations and redemptions. Monday’s decision extends the operational model used in traditional commodity funds—such as those backed by gold or oil—to crypto products.

“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,” said SEC Chairman Paul Atkins.

“I am pleased the Commission approved these orders permitting in-kind creations and redemptions for a host of crypto asset ETPs. Investors will benefit from these approvals, as they will make these products less costly and more efficient.”

In addition to permitting in-kind transactions, the SEC approved other changes supporting the expansion of the crypto ETP ecosystem.

These include allowing a mixed ETP that holds both spot bitcoin and ether, authorizing options and FLEX options on certain bitcoin ETPs, and raising the position limits on listed bitcoin options to 250,000 contracts—the same threshold used for other high-volume options.

Comments on Exchange Proposals

The commission also issued two scheduling orders to solicit public comments on exchange proposals seeking to list two large-cap crypto-based ETPs. These measures continue the agency’s stated aim to apply a “merit-neutral” approach when reviewing crypto-linked products.

The changes signal a broader shift in regulatory posture toward digital assets and suggest increased openness to treating crypto products on par with traditional financial instruments.