Asia Morning Briefing: SEC’s In-Kind BTC, ETH ETF Redemption Shift Happened Years Ago in Hong Kong
Asia Morning Briefing: Market Highlights
The Securities and Exchange Commission (SEC) has authorized in-kind redemptions for bitcoin and ether exchange-traded funds (ETFs), allowing institutional investors to create and redeem ETF shares directly using BTC or ETH. This improves efficiency by eliminating fiat conversions. However, this practice was already established in Hong Kong since late 2023, where the Securities and Futures Commission (SFC) mandated partnerships with licensed local crypto exchanges and custody solutions, thereby streamlining the process. This contrasts sharply with the U.S. experience, where regulatory concerns regarding custody, anti-money laundering, and market manipulation initially led to a cash-only approach for ETF redemptions. SEC Commissioner Mark Uyeda criticized this decision in January 2024, highlighting the incongruity with the standard practices for commodity-based ETFs. Hong Kong’s proactive approach, incorporating in-kind redemptions early on, demonstrates a more cohesive regulatory strategy.
A significant consequence of in-kind redemptions is the challenge in accurately tracking ETF flows. Crypto data aggregator SoSoValue notes that physical bitcoin subscriptions don’t generate cash inflows, making it difficult to track daily net inflows. Until ETF issuers provide both cash and crypto flow data, accurately assessing investor sentiment will remain problematic.
Market Movements:
Bitcoin (BTC) is trading above $117,500, but momentum is weak due to ETF outflows, profit-taking near $118,000, and macro headwinds (strong dollar, hawkish Fed expectations). Ethereum (ETH) trades above $3,700, considered a strong asymmetric bet by institutions. Gold rebounded to $3,334, snapping a four-day losing streak. Asia-Pacific markets opened mixed following confirmation of Trump’s tariff deadline. The S&P 500 closed lower, ending a six-day winning streak.
Other Crypto News:
- Tornado Cash developer Roman Storm will not testify in court.
- A Cornell Tech professor warns about the potential risks of AI agents and crypto.
- Senator Lummis introduced a bill proposing that Fannie Mae and Freddie Mac consider crypto as a mortgage asset.
