SEC Delays Ruling on Bitwise Bitcoin and Ether ETFs

Meta Description: The US SEC extends its decision deadline on whether to allow in-kind redemptions for Bitwise’s spot Bitcoin and Ether ETFs, citing the need for more time to consider the proposed rule changes.

Key Takeaways

• The SEC has extended its deadline for ruling on in-kind redemptions for Bitwise’s Bitcoin and Ether spot ETFs on NYSE Arca
• In-kind redemptions would allow investors to redeem ETFs for the underlying crypto assets directly rather than cash
• This represents another in a series of deadline extensions by the SEC for crypto-related decisions
• The regulatory approach toward crypto has shifted significantly under the new Trump administration and SEC Chair Paul Atkins

The United States Securities and Exchange Commission (SEC) has extended its deadline for ruling on in-kind redemptions for two separate cryptocurrency exchange-traded funds (ETFs).

According to a Wednesday SEC filing, the regulator will take additional time to decide whether to allow in-kind redemptions on NYSE Arca for Bitwise’s Bitcoin and Ether spot ETFs. The deadline extension keeps the decision within the statutory limit of 45 days, extendable to no more than 90 days.

“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change, and the issues raised therein,” the announcement stated.

Understanding In-Kind Redemptions

In-kind redemptions would allow investors to redeem ETFs for the underlying assets directly, in this case, Bitcoin or Ether. This method may carry significant tax advantages, as assets are transferred rather than sold, avoiding capital gains realization.

The process represents a fundamental shift in how crypto ETF investors could interact with their holdings, potentially offering more flexibility and tax efficiency compared to traditional cash redemptions.

Pattern of Regulatory Delays

This deadline extension continues a pattern of postponements by the SEC regarding crypto-relevant decisions. Earlier this month, attorneys for digital asset manager Grayscale challenged the US SEC’s delay in approving its Digital Large Cap ETF.

The SEC had initially approved the product, but the regulator’s Office of the Secretary decided to review the action shortly thereafter and halted the decision. Grayscale’s attorneys argued this violated the statutory deadline for approval or disapproval, calling the move inconsistent with established procedure.

Shifting Regulatory Landscape

Despite ongoing conflicts, most observers agree that since the Trump administration took power in Washington and SEC Chair Paul Atkins assumed the position previously held by Gary Gensler, the regulator’s stance toward cryptocurrency has changed significantly.

Earlier this month, Atkins indicated that the regulator now views tokenization as an “innovation” to be encouraged in the marketplace. He highlighted how his approach differs from his predecessor’s, noting that the SEC had previously hindered innovation through vague laws and “regulation through enforcement.”

“That day is over,” Atkins declared, emphasizing his commitment to regulatory transparency and establishing a foundation that allows for innovation and new products in the crypto space.

Market Impact and Future Outlook

The decision on in-kind redemptions for Bitwise’s crypto ETFs could set important precedents for the broader crypto ETF market. As the regulatory environment continues to evolve under new leadership, market participants are closely watching for signals about future crypto product approvals and regulatory frameworks.

The extended review period underscores the complexity of crypto regulation and the SEC’s cautious approach toward integrating innovative mechanisms into traditional financial structures.