Asia Morning Briefing: SEC’s In-Kind BTC, ETH ETF Redemption Shift Happened Years Ago in Hong Kong

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On Wednesday, the U.S. Securities and Exchange Commission revealed that investors can now perform in-kind redemptions for bitcoin and ether ETFs.

The ruling allows institutional investors to create and redeem ETF shares directly in BTC or ETH, enhancing efficiency by eliminating fiat conversions.

However, this is not a new occurrence in Hong Kong. In late 2023, at the start of the regulatory process to introduce crypto ETFs to the market (which launched in April 2024), the Securities and Futures Commission – the market regulator of the city – stated in a circular that in-kind redemptions would be permitted.

One reason they were permitted was technical: ETF issuers had to collaborate with authorized local crypto exchanges and employ custody solutions. This was not true in Ontario, Canada, where crypto ETFs appeared first, nor in the U.S. In Hong Kong, the discussion regarding Ether’s classification as a security was not as prevalent as it was in the U.S