SEC's Major New Regulation: Bitcoin and Ethereum Spot ETFs Approved for Physical Redemption, Crypto Market Welcomes Significant Regulatory Upgrade

The U.S. Securities and Exchange Commission (SEC) has recently approved the allowance for Bitcoin Spot ETFs and Ethereum Spot ETFs to conduct physical redemptions, marking a significant shift in the regulatory framework for crypto assets. This move aligns the operational rules of exchange-traded products (ETPs) in the cryptocurrency space with traditional commodity ETPs, such as gold ETPs, for the first time, providing institutional investors and crypto users with a more flexible and low-cost compliance pathway. Additionally, the SEC has approved Bitcoin ETF Options trading and significantly increased the holdings limit, indicating that future altcoin ETFs will also adopt a physical model, further integrating crypto assets into the mainstream financial system.

Crypto Assets ETP Welcomes Milestone Change: Physical Redemption Finally Approved According to the official press release from the U.S. Securities and Exchange Commission (SEC), the agency has approved Authorized Participants (AP) to directly use real Bitcoin or Ether to create and redeem shares of exchange-traded products (ETPs). This decision fundamentally changes the previous requirement that was limited to cash redemptions. The SEC clearly stated that this adjustment aims to incorporate Ether spot ETFs and Bitcoin spot ETFs into the existing regulatory framework for commodity ETPs (such as gold ETPs), achieving rule uniformity.

Why is physical redemption so important for crypto users? SEC Chairman Gary Gensler (Note: the original text mistakenly mentioned Paul S. Atkins, it should be Gary Gensler) stated on the X platform that these directives reflect the SEC's efforts to establish an effective regulatory framework for the crypto assets market. He pointed out that the new physical redemption process is designed to reduce costs and improve operational efficiency for investors and market participants. Jamie Selway, Director of the SEC's Division of Trading and Markets, emphasized in a press release that the approval of the physical redemption process for Ethereum ETF and Bitcoin ETF provides significant operational flexibility and cost savings, and called this decision a "key step in the development of the crypto ETP market." Previously, the SEC had confirmed receipt of Nasdaq's application for the staking feature submitted for BlackRock's Ethereum Spot ETF.

SEC synchronously approves Bitcoin ETF Options and increases the 10x Holdings limit In addition to tightening compliance standards for cryptocurrency regulation regarding physical redemptions, the SEC also voted to approve other related directives. This includes the approval of options trading for specific Bitcoin Spot ETFs, as well as Flexible Options (FLEX Options) based on Bitcoin ETP shares.

The approval from U.S. regulators also includes an important change: a substantial increase in the holdings limit for Bitcoin ETF options. This limit has jumped from the original 25,000 contracts to 250,000 contracts, achieving an astonishing 10-fold increase. These changes are expected to greatly stimulate the liquidity and scale of the Bitcoin ETP derivatives market.

Bloomberg senior ETF analyst Eric Balchunas emphasized the impact of this initiative on the X platform. He quoted a statement from an issuer saying, "This is huge... and will spawn a large number of options-based Bitcoin ETF strategies."

Physical redemption becomes the new benchmark, altcoin ETF may follow According to the press release, all of the above updates take effect immediately. The SEC's ruling is a continuation of its more pragmatic approach to digital assets, especially following President Trump's signing of the Genius Act. This new initiative further promotes the integration of Crypto Assets into regulated markets and aligns its operational practices with existing commodity ETPs.

Bloomberg analyst James Seyffart pointed out on the X platform that the upcoming approved altcoin ETF will likely include physical redemption clauses from the start. Seyffart described this shift as "more of a correct directional progress."

At the same time, Nate Geraci, president of The ETF Store, emphasized the SEC's forward-looking stance. He quoted SEC Chairman Gensler's statement: "This is a new era for the SEC, and one of my key priorities during my tenure is to create a regulatory framework that is 'fit-for-purpose' for the crypto assets market."

Conclusion: The SEC's approval of the Bitcoin ETF and the Ethereum Spot ETF for physical redemption, along with the simultaneous opening of options trading and raising the holdings limit, is a key step in the deep integration of crypto assets into the traditional financial market. This not only significantly reduces the participation costs for investors and enhances market efficiency but also establishes physical redemption as the standard model for future crypto ETPs (including potential altcoin ETFs), clearing important operational barriers for institutional funds to enter in compliance, marking a new stage in the regulatory environment for crypto assets.