Long perceived as the sworn enemy of the crypto industry, the SEC seems determined to improve its image. Under new leadership, the agency adopts a more open stance, focused on innovation. Gone are the days of systematic showdowns, replaced by listening and flexibility. This shift is embodied in the recent initiative concerning the WisdomTree Bitcoin Fund. For the first time, the SEC actively consults the public on an innovative mechanism: “in-kind” creations and redemptions. An approach that stands in contrast to past deadlocks.

The Debate on In-Kind Creations Shakes Bitcoin ETFs

On June 2, the SEC opened a public comment period on a proposal from the Cboe BZX Exchange. This aims to modify the operating rules of the WisdomTree Bitcoin Fund (BTCW), a spot Bitcoin ETF approved in January 2024. The issue? Allowing investors to create or redeem shares “in-kind”, that is, directly in bitcoin, without involving cash.

According to the SEC:

The institution of procedures is appropriate […] given the legal and political stakes involved.

This careful wording does not hide the importance of this technical debate. Meanwhile, similar proposals remain pending: the VanEck Ethereum Trust, the VanEck Bitcoin Trust, and the closely watched BlackRock iShares Bitcoin Trust.

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All demand the same flexibility: more agile mechanisms, better suited to the crypto universe. But to take this step, the SEC wants guarantees. It asks the public to comment on the consistency of these proposals with Section 6(b)(5) of the Securities Exchange Act. This section requires that exchange rules protect investors and prevent market manipulation. For now, no green light. But the lines are moving.

A More Strategic SEC, an Evolving Image

If the SEC grants approval, it will be a symbolic and operational turning point. Authorizing in-kind creations and redemptions would enhance the liquidity of crypto ETFs. It would allow institutional investors to manage their exposure with lower fees and greater transparency. The gesture would signal a tacit acknowledgment of the growing maturity of crypto products, including those linked to Ethereum, Bitcoin, or other major blockchains.

In its release, the SEC invites “interested persons to submit comments on the proposed rule change“. This participatory approach gives the SEC a new face: that of an institution more connected to market developments.

Key points to remember:

• WisdomTree Bitcoin Fund wants to switch to “in-kind” creations and redemptions;
• The SEC has not yet approved, but actively consults the public;
• Several crypto ETFs linked to Ethereum and Bitcoin are awaiting the same treatment;
• The goal is to prevent manipulation and protect investors;
• Adoption of this measure would mark a strategic shift for the SEC.

This change of tone does not make it a blind crypto advocate. But it indicates a repositioning strategy. No longer frozen in the face of innovations.

The SEC now plays the openness card. But it does not intend to rush things. Proof of this, it has just postponed until this summer the approval of many major crypto ETFs. Innovation yes, but in carefully measured steps.