The Securities and Exchange Commission has once again postponed a crucial decision regarding in-kind creation and redemption capabilities for Bitwise Bitcoin and Ethereum exchange-traded funds, extending the review period until September 8, 2025.
The proposed in-kind mechanism would fundamentally transform how these ETFs operate by allowing authorized participants to exchange actual cryptocurrency tokens directly for ETF shares, rather than going through the current cash-based settlement process.
This operational change would align crypto ETFs more closely with traditional commodity funds and potentially reduce trading costs and market inefficiencies that currently exist in the cash-only model. According to the SEC filing, the commission believes it requires “sufficient time to consider the proposed rule change and the issues raised therein.”
The extension follows a similar pattern established with other major asset managers, including BlackRock, whose iShares Ethereum Trust received a comparable delay until August 26 for its own in-kind redemption proposal. These postponements underscore the complex regulatory considerations surrounding direct cryptocurrency custody and transfer mechanisms within traditional financial products.
Broader Industry Implications
The delay comes during a period of unprecedented activity in the crypto ETF space, with asset managers submitting applications for increasingly diverse cryptocurrency investment products.
Recent filings have included proposals for ETFs tracking memecoins, alternative cryptocurrencies, and even non-fungible tokens, alongside requests to add staking capabilities to existing funds. This surge in applications reflects growing institutional confidence in the regulatory environment under the pro-crypto leadership that has emerged in recent months.
Despite the appointment of crypto-friendly officials and the departure of digital asset skeptics from the SEC’s ranks, the regulator continues to maintain a measured approach to cryptocurrency investment products. Recent actions, including placing Grayscale’s multi-token ETF under review and withholding approval for spot Solana ETFs, demonstrate that enhanced political support has not translated into rubber-stamp approvals for complex crypto products.
The in-kind redemption feature has become a particularly contentious issue, with regulators expressing concerns about operational complexity, security protocols, and potential market manipulation risks. Meanwhile, ETF issuers argue that these capabilities are essential for creating truly efficient products that can compete with traditional commodity ETFs and provide investors with optimal tax treatment and cost structures.
Future ETF Outlook
The regulatory uncertainty has not dampened market enthusiasm for cryptocurrency assets, with Bitcoin trading near $118,900 and Ethereum reaching five-month highs around $3,360. These price movements reflect broader institutional adoption and growing confidence in the long-term viability of digital assets as investment vehicles.
Industry experts remain optimistic about eventual approval, citing supportive comments from SEC Commissioner Hester Peirce, who has indicated that in-kind creations and redemptions for crypto ETFs are “definitely coming at some point.” This perspective suggests that the current delays represent procedural caution rather than fundamental opposition to the concept.
The September 8 deadline will be closely watched by market participants, as the SEC’s decision could establish important precedents for the broader crypto ETF industry. Approval would likely trigger a wave of similar applications from competing asset managers, while rejection could force the industry to reconsider its approach to product innovation within existing regulatory constraints.
