30.07.2025 06:18
The Securities and Exchange Commission (SEC) has significantly altered the landscape for cryptocurrency exchange-traded funds (ETFs) by eliminating a major hurdle: the mandatory cash conversion requirement. This pivotal decision, announced in a July 29th order, allows for in-kind creation and redemption of crypto ETFs.
Previously, market makers were obligated to convert crypto assets into cash before interacting with the funds, a process that increased transaction costs and slowed trading significantly. This cumbersome system hampered the efficiency of crypto ETF pricing and hindered their resemblance to more established commodity-based funds. The SEC's new rule effectively rectifies this discrepancy.
By permitting the direct transfer of cryptocurrencies like Bitcoin and Ether, the SEC's action improves pricing efficiency and liquidity. Market makers can now seamlessly deposit or redeem crypto assets, eliminating the delays and expenses associated with cash conversions. This streamlined process mirrors the mechanisms used in other commodity-based ETFs, bringing crypto ETFs closer to parity in terms of operational efficiency.
This change is widely viewed as a catalyst for substantial growth in the crypto ETF market. Analysts, such as MartyParty, a prominent crypto analyst, have characterized this ruling as the removal of the final major obstacle. In-kind transactions are expected to alleviate the pricing discrepancies often observed between ETF shares and their underlying crypto assets, thereby attracting a greater influx of institutional investors who value cost-effectiveness and improved liquidity. The ability for large firms to directly interact with the fund using Bitcoin or Ether, for example, ensures tighter price tracking and significantly reduces the need for cash-based transactions. This signifies a monumental step forward, paving the way for broader institutional adoption of crypto ETFs. The removal of the cash conversion requirement, obtained from internet sources, positions the market for a new era of expansion.
