SEC is optimistic about the physical redemption application for encryption ETF: Can investors subscribe to ETF by holding BTC?

As the SEC's attitude towards crypto products is changing, several crypto ETF issuers have recently submitted amendments to seek the ability to purchase and redeem Bitcoin and Ethereum Spot ETFs using the "crypto assets" themselves. This is not only an upgrade in terms of technology and efficiency but could also be a key step in incorporating BTC and ETH into the TradFi framework.

ETF issuers submit physical redemption applications, SEC is optimistic.

21Shares, Fidelity (, Franklin Templeton ), VanEck, and WisdomTree, among other Crypto Assets ETF issuers, submitted amended applications to the SEC ( yesterday, hoping to open the "in-kind" subscription and redemption mechanism ).

NEW: More positive signs regarding Bitcoin & Ethereum ETFs obtaining the ability to do in-kind creation and redemption

5 different funds on CBOE filed amendments with the SEC. This indicates to me that there is positive movement and likely fine tuning happening with the SEC pic.twitter.com/Xw0Z7SbYwj

— James Seyffart (@JSeyff) July 22, 2025

This mechanism will allow Authorized Participants ( to directly use BTC or ETH to subscribe to or redeem ETFs, instead of the current cash transaction method.

This mechanism has long been applied to commodity-based Spot ETPs such as gold ETFs, and is expected to bring equal status in financial products for the crypto industry. Bloomberg ETF analyst James Seyffart revealed that the SEC is fine-tuning and negotiating this, sending clear positive signals.

Bloomberg analyst Seyffart: Limited to institutional participation, but significant.

Despite the fact that this change is limited to authorized participants, such as market makers and large Wall Street institutions, retail investors still cannot directly exchange their tokens for ETFs. However, this move is still seen as a significant advancement because it aligns the processing of crypto ETFs with traditional ETFs, making the products more efficient and more liquid. Seyffart stated:

Although the Crypto Assets ETF products on the market are already very efficient, the in-kind mechanism can further reduce wear and tear costs, which is a necessary process for the maturation and institutionalization of Crypto Assets ETFs.

In addition, SEC Commissioner Hester Peirce publicly stated at the end of June that the physical redemption system is about to be implemented, which has given the market more confidence that this application is not just a formality, but a significant signal of a policy direction shift.

) Crypto Mom Hester Peirce: Bitcoin ETF physical redemption mechanism "is under review" (

Confidence Shift: Billions of Dollars Monthly Inflow into BTC, ETH Spot ETF

The changes in market funds and institutional attitudes have quickly responded to this trend. According to SoSoValue data, the 12 Bitcoin and Ethereum Spot ETFs in the United States have maintained net inflows for four consecutive months. Particularly, since mid-May, the weekly inflow has grown by 3 to 5 times compared to that time, with this month seeing inflows of up to 5.5 billion USD and 4.1 billion USD respectively.

Ethereum Spot ETF weekly inflow performance is impressive

After the future application for the in-kind system is opened, it is expected to allow investors to subscribe to ETFs with tokens. For institutional investors who wish to hold BTC or ETH in the long term, this provides a more compliant and low-friction asset conversion and custody method, making it more integrated with the TradFi market.

Recently, JPMorgan has just revealed that it is considering offering loan services using BTC and ETH as collateral, indicating its increasingly legitimate and compliant position within the financial system.

)Australia's Block Earner launches the first Bitcoin-backed mortgage: priced in BTC, housing prices are getting cheaper(

Encryption ETF Phase 2: Holding BTC or ETH allows for direct subscription to the ETF.

Although the in-kind system currently only targets institutional participation, James Seyffart also added, "I personally believe that it will eventually be opened up for the public to use Crypto Assets to subscribe and redeem, but that may still take time, step by step."

As the SEC's stance turns optimistic, market demand increases, and institutional participation accelerates, it can be expected that the future of Crypto Assets ETF physical issuance and redemption will no longer be just a concept, but a reality.

The SEC is optimistic about the crypto ETF physical redemption application: Can investors subscribe to the ETF by holding BTC? Originally appeared in Chain News ABMedia.