SEC officially allows crypto ETFs to create and redeem shares using Bitcoin and Ethereum directly, instead of cash.

The claim that the SEC officially allows crypto ETFs to create and redeem shares using Bitcoin and Ethereum directly is misleading. As of early 2024, the SEC approved spot Bitcoin exchange-traded products (ETPs) that use a cash-based model for creations and redemptions, where authorized participants deliver cash to the fund, which then buys the underlying cryptocurrency, and vice versa for redemptions.

This approach addresses SEC concerns about custody and settlement risks. While there is ongoing discussion and filings by ETF issuers seeking approval for in-kind redemptions, where shares can be created or redeemed directly with the underlying assets like Bitcoin or Ethereum, the SEC has not yet formally authorized this process. Several sources note that in-kind redemptions are preferred by ETF issuers for tax efficiency but remain under regulatory review.

Therefore, while progress toward in-kind redemption approval is anticipated, it is not officially permitted at this time.