If you have been watching the cryptocurrency market and wondering what all the fuss about ETFs and ETPs means for you, July 29, 2025, marked a day you should understand. On that date, the U.S. Securities and Exchange Commission voted to allow in-kind creations and redemptions for cryptocurrency exchange-traded products, a decision that might sound technical but has real implications for anyone investing in crypto through traditional financial accounts.
The Basics
Let us start with what exchange-traded products are. An ETP is a financial instrument that tracks the price of an underlying asset and trades on a stock exchange, just like shares of Apple or Microsoft. When you buy a Bitcoin ETP, you are buying a product that follows the price of Bitcoin without having to buy, store, or secure actual Bitcoin yourself. This makes it accessible through regular brokerage accounts, retirement accounts, and other traditional investment vehicles.
Now, here is where “in-kind” comes in. Previously, when institutions wanted to create new shares of a Bitcoin or Ethereum ETP, they had to use cash. An authorized participant, typically a large financial institution, would deposit cash with the ETP issuer, who would then use that cash to buy Bitcoin on the open market. The same process worked in reverse for redemptions: the issuer would sell Bitcoin for cash and give the cash back. This cash-based system added friction, costs, and tax complications.
With in-kind creations and redemptions, authorized participants can now deposit actual Bitcoin or Ethereum directly in exchange for ETP shares, and receive actual Bitcoin or Ethereum when redeeming shares. This is how gold ETFs have worked for years, and bringing this model to crypto ETPs is a significant step toward treating digital assets like any other commodity.
Why It Matters
This change matters for several reasons. First, it reduces costs. Cash-based creations and redemptions required buying and selling cryptocurrency on the open market, which incurs trading fees, spreads, and potential market impact costs. In-kind transactions eliminate these intermediary steps, and those savings can flow through to investors in the form of lower expense ratios and tighter bid-ask spreads.
Second, it improves operational efficiency. When Bitcoin is trading near $117,922 and Ethereum near $3,793 as they were on July 29, even small percentage differences in transaction costs translate to meaningful dollar amounts for large institutional players. More efficient creation and redemption processes make crypto ETPs more attractive to institutional investors, which can increase liquidity and potentially reduce volatility over time.
Third, it signals regulatory maturation. SEC Chairman Paul S. Atkins described the decision as part of building “a fit-for-purpose regulatory framework for crypto asset markets,” signaling that regulators are moving toward treating crypto products with the same operational standards as traditional commodity products.
Getting Started Guide
For investors interested in gaining exposure to Bitcoin or Ethereum through ETPs, here is what you need to know to get started. First, check whether your brokerage account offers access to crypto ETPs. Most major brokerages now support trading of the major Bitcoin and Ethereum ETPs. You can search for them using their ticker symbols, just like you would search for any other stock or ETF.
Second, understand the fee structure. While the move to in-kind transactions should gradually reduce costs, current expense ratios for crypto ETPs vary between providers. Compare the annual expense ratios before choosing which product to invest in. Even a difference of 0.1 percent adds up over time, especially in a portfolio with significant allocations.
Third, consider your investment horizon. Crypto ETPs make the most sense for investors who want long-term exposure to digital assets without the complexity of self-custody. If you plan to actively trade or need to move crypto between wallets and DeFi protocols, holding the actual asset directly may be more appropriate.
Common Pitfalls
New investors in crypto ETPs should be aware of several common mistakes. Do not assume that all crypto ETPs are the same. Different products may track different indices, have different fee structures, and offer different tax treatments. Read the prospectus carefully before investing. Also, remember that ETPs trade only during stock market hours, while crypto markets operate 24 hours a day, 7 days a week. This means the ETP price may not always perfectly reflect the current cryptocurrency price, especially over weekends or during overnight market movements.
Another pitfall is overlooking the tax implications. While crypto ETPs eliminate the need to manage private keys and wallets, they are still subject to capital gains tax when sold at a profit. Consult with a tax professional to understand how crypto ETP investments fit into your overall tax strategy.
Next Steps
The SEC’s decision on July 29 also included approvals for combined Bitcoin-Ether ETPs, listed options on Bitcoin ETPs, and expanded position limits. These developments are creating a richer ecosystem of crypto investment products. As the market continues to evolve, staying informed about regulatory changes and new product offerings will help you make better investment decisions. Start by reviewing your current portfolio allocation and consider whether a crypto ETP position aligns with your risk tolerance and investment goals. As always, never invest more than you can afford to lose, and consider diversifying across asset classes to manage risk effectively.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.
KYC requirements are killing the innovation in smaller markets
Amara KYC requirements arent killing innovation in small markets, they are just making it formal. the unregulated era is over
the in-kind rule specifically helps authorized participants avoid cash conversion delays. retail just sees better tracking and lower fees
Finally some regulatory clarity from the SEC. This should bring more traditional advisors into crypto allocations.
Regulatory clarity is the missing piece for mainstream adoption
Global regulatory coordination is needed to prevent arbitrage
Compliant exchanges will win the long game
WhaleAlert compliant exchanges win when in-kind ETPs reduce the spread. lower costs attract institutional allocations
Stablecoin regulation will unlock trillions in institutional capital
SEC approving in-kind for crypto ETPs but not for commodity ETPs is very on brand. better late than never i guess
in-kind creation means market makers dont need cash buffers anymore. tighter spreads and lower premiums on BTC ETPs finally
etp_nerd the spread compression on BTC ETPs after in-kind was immediate. saw basis narrow from 40bps to under 10 within a week
index_fund_rat the basis compression was instant. saw ETP spreads tighten within 48 hours of the rule. authorized participants finally have the right tool
basis compression from 40bps to 10 in a week is insane. the prime brokers who lived off that spread must be furious
spreadsqueeze basis compression from 40bps to 10 in a week. the prime brokers who lived off that spread are definitely not happy. efficiency eats margins
basis_trade_witness_ 40bps to under 10 in a week. the compression was brutal for anyone running basis arbitrage strategies on the old cash model
SEC approving in-kind for crypto ETPs while dragging feet on everything else is telling. they want institutional plumbing to work first
This in-kind rule is huge for reducing premiums/discounts on crypto ETPs. Market makers can now arbitrage more efficiently without cash drag.
Does this apply to existing ETH and BTC ETFs or only new ones? The timeline isn’t clear from the article.
SEC approving in-kind for crypto while stalling on everything else tells you exactly who this rule serves. institutional plumbing first, retail access never
in-kind creation means APs can deliver actual BTC instead of cash. spreads tighten, tracking error shrinks, everyone wins except the prime brokers
Mateusz Z. SEC serving institutional plumbing first is the entire playbook. retail gets access through wrappers with fees while APs get the efficient mechanism
Soren L. institutional plumbing always gets served first. APs get efficient creation, retail gets wrapper fees. same playbook as every other asset class
SEC serving institutional plumbing first is the pattern. APs get efficient creation, retail gets a fee wrapper. same story every time
in-kind for crypto ETPs but not commodities tells you everything. they want the BTC plumbing working before the next supply shock
in-kind creation fixes the tracking error problem but the real win is APs not needing cash buffers. that capital was sitting dead on the sidelines. now it can actually work