Fidelity's Bitcoin and Ethereum ETF In-Kind Redemption Decision Postponed by SEC
The Securities and Exchange Commission (SEC) has delayed a decision on Fidelity's proposal to integrate in-kind redemptions into its Bitcoin and Ethereum exchange-traded funds (ETFs), affecting one of the largest asset managers seeking to streamline ETF operations through direct cryptocurrency asset exchanges.
In-kind redemptions enable authorized participants to swap ETF shares for the underlying cryptocurrency assets instead of cash, a mechanism standard in traditional ETFs that helps reduce trading costs and tax implications for investors. The SEC has yet to provide a specific timeline for when it will finalize its decision on Fidelity's proposals, leaving investors in the dark regarding the availability of these features.
Fidelity is not alone in facing regulatory delays, as the SEC also postponed rulings on in-kind redemption proposals from WisdomTree for its Bitcoin and Ethereum funds, as well as VanEck's Bitcoin fund in April. Recently, the SEC acknowledged BlackRock's filing for in-kind redemptions on its spot Ethereum ETF, hinting at growing regulatory interest in these requests from major asset managers.
Asset managers within the crypto industry are pushing for features that would bring their products closer to traditional ETF structures, with in-kind redemptions being seen as essential for operational efficiency in cryptocurrency ETFs. The industry hopes the SEC will establish consistent standards for all issuers, allowing U.S. crypto ETFs to compete globally and match international standards in terms of efficiency and cost-effectiveness.
The SEC faces important deadlines related to crypto ETF features in the coming weeks. By June 1, it must decide on Grayscale's request to introduce staking to its spot Ethereum ETF, while another decision deadline arrives June 3 for Bitwise and WisdomTree's updated filings seeking approval for in-kind redemptions.
The outcome of these pending decisions will shape the future structure of crypto ETFs in the United States, as the industry awaits regulatory clarity under new leadership, with Paul Atkins recently confirmed as the new SEC Chair. His anticipated fresh perspective on crypto ETF policies may signal potential changes in the SEC's approach to these applications.
- The SEC's decision on Fidelity's proposal to implement in-kind redemptions in Bitcoin and Ethereum ETFs, a mechanism common in traditional ETFs, could reduce costs and tax implications for investors.
- Asset managers like WisdomTree and VanEck, apart from Fidelity, have also faced regulatory delays in their in-kind redemption proposals for Bitcoin and Ethereum funds, similar to the decisions postponed by the SEC in April.
- The SEC's ruling on Grayscale's request to introduce staking to its spot Ethereum ETF by June 1, and the decision on Bitwise and WisdomTree's updated filings seeking approval for in-kind redemptions by June 3, will significantly influence the future structure of crypto ETFs in the United States, particularly under the new leadership of recently confirmed SEC Chair, Paul Atkins.
