In a landmark decision poised to redefine digital asset investment in the United States, the Securities and Exchange Commission (SEC) has granted approval for in-kind settlement mechanisms for crypto asset-backed Exchange Traded Products (ETPs), encompassing those tracking Bitcoin and Ethereum. Effective July 29, 2025, this pivotal policy shift transcends the prior cash-only settlement mandate, signifying a substantial regulatory evolution within the digital asset sector.
- The SEC has approved in-kind settlement for crypto ETPs, including those tracking Bitcoin and Ethereum.
- This new policy will become effective on July 29, 2025, moving beyond cash-only settlement.
- The framework permits authorized participants to directly exchange crypto assets for ETP shares.
- The Commission also authorized ETPs combining spot Bitcoin and Ethereum, plus new options products.
- Position limits for Bitcoin ETP options have been significantly increased to 250,000 contracts.
The New In-Kind Settlement Framework
This new framework empowers authorized participants to directly exchange actual crypto assets for ETP shares, thereby aligning these digital products with established commodity-based ETPs, such as those for gold or oil. This innovative methodology is anticipated to significantly enhance overall market efficiency by mitigating operational complexities, reducing associated costs, and bolstering liquidity for both ETP issuers and investors.
SEC Chair Paul S. Atkins characterized the approval as a strategic stride towards establishing a “more appropriate regulatory framework” for digital assets, emphasizing its potential to render products “cheaper and more efficient” for investors. Concurring with this outlook, Jamie Sellway, Director of the Division of Trading and Markets, further affirmed that these updates furnish crucial “flexibility and economies,” thereby cultivating a more dynamic and robust crypto market landscape.
Expanding Investment Instruments
Beyond the foundational shift to in-kind settlements, the Commission also sanctioned a notable expansion in the array of available crypto investment instruments. This includes the authorization of ETPs composed of a combination of spot Bitcoin and Ethereum, alongside the introduction of standard options and flexible (FLEX) options on Bitcoin-based ETPs. Moreover, position limits for options on Bitcoin ETPs have been substantially raised, now accommodating up to 250,000 contracts, signaling an increasing institutional acceptance and integration of these derivatives.
Implications for the Digital Asset Market
This comprehensive policy update from the SEC underscores a burgeoning acknowledgment of the crypto market’s accelerating maturity and the persistent demand from investors for diversified digital asset products. Such strategic regulatory integration into traditional financial structures is poised to facilitate broader institutional and retail adoption, heralding a new phase for digital assets within mainstream finance.
Kate specializes in clear, engaging coverage of business developments and financial markets. With a knack for breaking down economic data, she makes complex topics easy to understand.