According to a post published on Tuesdayblog post, the U.S. Securities and Exchange Commission has approved the creation and redemption of cryptocurrency-based exchange-traded funds in physical form. Previously, regulatory authorities approved spotBitcoinandEthereumETFs are limited to creation and redemption in cash, preventing investors from exchanging ETF shares for their underlying tokens and vice versa.
Now, if the fund’s authorized participants (i.e. large institutional investors) wish to exchange their shares for BTC backing them, they can do so, rather than the issuer being forced to sell Bitcoin through a market maker and deliver cash.
The European Commission also said it was advancing a “merit-neutral approach to the review of cryptocurrency products,” covering products holding Bitcoin and Ethereum.
SEC Chairman Paul Atkins said in a statement that these approvals will ultimately benefit the market and investors through lower-cost and more efficient products.
He said: "It is a new day at the SEC, and my first priority as chairman is to develop a practical regulatory framework for the crypto-asset market. Today's approval will continue to build a sound regulatory framework for cryptocurrencies, thereby creating a deeper and more dynamic market."
The measure appears to apply to all cryptocurrency ETFs approved by regulators, including Bitcoin and Ethereum. The exchange previously submitted proposed rule changes on behalf of asset managers seeking approval for physical redemptions.
The month isn’t over yet, but Bitcoin and Ethereum ETFs have already seen record inflows of $11.2 billion, according to crypto asset manager CoinShares. Final data will be released after markets open on Thursday. James Butterfill, director of research at CoinShares, said that ETH funds have performed well recently, and last week was no exception. Ethereum ETFs attracted $1.6 billion worth of new money, he wrote. That means they have attracted $7.8 billion in capital so far this year, surpassing the same period last year.
Bloomberg ETF analyst James Seyffart said changes to the proposal earlier this month showed regulators were prepared to approve physical redemptions.
The U.S. Securities and Exchange Commission (SEC) has delayed a decision on whether to approve exchange-traded funds (ETFs) tied to Bitcoin and Solana, the agency said in a separate filing on Monday, continuing its regulatory caution on cryptocurrency-related investment products. The SEC will take up to eight more weeks to decide whether to allow the Truth Social Bitcoin ETF to begin trading and whether to approve the conversion of the Grayscale Solana Trust into an exchange-traded fund (ETF).