- SEC approved in‑kind creation and redemption for Bitcoin and Ether ETPs
- SEC raised the IBIT options limit to 250 000 contracts
- Changes align crypto ETFs with traditional fund operations and support market liquidity
Since February 25, 2025, the US regulatory landscape for digital assets has shifted. The SEC cleared two key measures that streamline crypto fund operations and deepen market liquidity. For the first time, spot Bitcoin and Ether ETPs can use in‑kind creation and redemption, and options on BlackRock’s iShares Bitcoin Trust (IBIT) now carry a position limit ten times higher. Together, these updates mark a move from cautious oversight toward practical integration of digital assets into mainstream finance.
SEC approval of in-kind creation and redemption
The SEC’s authorization replaces a cash‑only model that applied to dozens of crypto ETPs since their launch. Previously, authorized participants had to exchange cash for fund shares, limiting tax efficiencies and operational flexibility. Under the new rule, institutional players can transfer baskets of underlying tokens—Bitcoin or Ether—directly with issuers. This method mirrors long‑standing practices in equity and bond funds, while addressing unique challenges around custody, security and settlement on blockchain networks.
How in-kind transfers will work
In‑kind transfers involve an authorized participant submitting a block of ETP shares in exchange for the same value in underlying assets. In a traditional equity context, that means stock certificates; here, it means securely transferring digital tokens through established custody channels. The shift required coordination on secure wallet infrastructure, settlement finality and insurance against loss. By clearing these hurdles, the SEC has aligned crypto ETP plumbing with existing market standards, potentially narrowing bid‑ask spreads and reducing back‑office friction for fund managers.
SEC expands options limits for IBIT
On the same day, the Commission approved Nasdaq’s proposal to raise the position limit for options on IBIT from 25,000 contracts to 250,000. This tenfold increase reflects a surge in open interest, which has more than tripled in 2025 to roughly $34 billion in notional value. Average daily volume in IBIT‑linked options now sits near $4 billion. By accommodating larger trades, the SEC aims to deepen liquidity and improve price formation in the crypto options market, bringing it closer to volume levels typical of leading equity and commodity ETFs.
Market response and future outlook
ETF analysts highlight the symbolic importance of these rulings. Eric Balchunas of Bloomberg Intelligence noted that permitting in‑kind redemptions signals a more pragmatic stance on crypto integration. Although end‑investors may not see immediate changes in their trading screens, fund professionals welcome the operational gains. Looking ahead, the SEC indicated it will review mixed‑asset product proposals on a merit‑neutral basis, ope
Conclusion
The SEC’s recent approvals mark a measured shift in how crypto funds operate and trade. Allowing in‑kind creation and redemption brings crypto ETPs closer to traditional fund practices. Raising the IBIT options limit addresses growing market demand and supports deeper liquidity. While end‑investors may notice little change immediately, these updates ease operational processes for fund managers. Going forward, merit‑neutral review of new crypto products may encourage additional ETP filings.
Disclaimer
The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is opinion of the author and does not reflect any view or suggestion or any kind of advise from cryptonewsbytes.com. The author declares he does not hold any of the above mentioned tokens or received any incentive from any company.
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