SEC’s in-kind approval can spark HUGE $710 billion supply squeeze for Bitcoin ETFs
The post SEC’s in-kind approval can spark HUGE $710 billion supply squeeze for Bitcoin ETFs appeared on BitcoinEthereumNews.com. On July 29, the U.S. Securities and Exchange Commission approved in-kind creation and redemption mechanisms for spot Bitcoin and Ethereum exchange-traded products (ETPs), marking a major shift in the structural framework underpinning crypto investment vehicles. The decision replaces the cash-only model used in the first wave of crypto ETPs and aligns the regulatory architecture for digital asset funds with existing standards in commodity ETPs, such as those for gold. SEC Chair Paul S. Atkins, who assumed the role in April, described the move as part of a broader push to establish a “fit-for-purpose” crypto framework. The SEC’s order also advanced a set of accompanying approvals including mixed BTC+ETH ETP applications, options on certain spot Bitcoin ETPs, and elevated position limits for these derivatives, up to the generic 250,000-contract threshold seen in traditional commodity markets. These changes aim to harmonize the crypto derivatives ecosystem with that of long-established physical-asset ETPs. The initiative follows a wave of July filings from exchanges that had signaled regulatory readiness for in-kind workflows. Unlike cash-based structures, where authorized participants (APs) submit fiat currency and rely on a fund’s agent to execute crypto purchases on open markets, in-kind mechanisms allow APs to deliver or receive the underlying asset, Bitcoin or Ethereum, directly. This removes the need for fund-driven market trades and enables participants to use existing sourcing channels such as over-the-counter (OTC) desks, internal inventory, or borrowing arrangements. The result is typically lower transaction costs, tighter bid-ask spreads, and enhanced net asset value (NAV) tracking, as is well established in commodity ETFs like SPDR Gold Shares. How in-kind creations and redemptions changes the model The operational shift reconfigures primary market flows for arbitrage-focused APs. Under the in-kind model, they can short the ETF and source crypto directly for creation when premiums arise or redeem ETF shares for…
The post SEC’s in-kind approval can spark HUGE $710 billion supply squeeze for Bitcoin ETFs appeared on BitcoinEthereumNews.com.
On July 29, the U.S. Securities and Exchange Commission approved in-kind creation and redemption mechanisms for spot Bitcoin and Ethereum exchange-traded products (ETPs), marking a major shift in the structural framework underpinning crypto investment vehicles. The decision replaces the cash-only model used in the first wave of crypto ETPs and aligns the regulatory architecture for digital asset funds with existing standards in commodity ETPs, such as those for gold. SEC Chair Paul S. Atkins, who assumed the role in April, described the move as part of a broader push to establish a “fit-for-purpose” crypto framework. The SEC’s order also advanced a set of accompanying approvals including mixed BTC+ETH ETP applications, options on certain spot Bitcoin ETPs, and elevated position limits for these derivatives, up to the generic 250,000-contract threshold seen in traditional commodity markets. These changes aim to harmonize the crypto derivatives ecosystem with that of long-established physical-asset ETPs. The initiative follows a wave of July filings from exchanges that had signaled regulatory readiness for in-kind workflows. Unlike cash-based structures, where authorized participants (APs) submit fiat currency and rely on a fund’s agent to execute crypto purchases on open markets, in-kind mechanisms allow APs to deliver or receive the underlying asset, Bitcoin or Ethereum, directly. This removes the need for fund-driven market trades and enables participants to use existing sourcing channels such as over-the-counter (OTC) desks, internal inventory, or borrowing arrangements. The result is typically lower transaction costs, tighter bid-ask spreads, and enhanced net asset value (NAV) tracking, as is well established in commodity ETFs like SPDR Gold Shares. How in-kind creations and redemptions changes the model The operational shift reconfigures primary market flows for arbitrage-focused APs. Under the in-kind model, they can short the ETF and source crypto directly for creation when premiums arise or redeem ETF shares for…
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