Bitcoin ETFs: SEC’s Crypto Circus & the Great In-Kind Swindle 🎪🤡

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Ah, the Bitcoin ETF saga—a tale as old as time, or at least as old as that one drunken weekend in Satoshi’s basement. Can the so-called “in-kind” design rescue these financial Frankensteins from their own operational absurdities? Or is this just another act in the SEC’s never-ending puppet show? 🎭

  • In late July, five ETF titans—Fidelity, Ark 21Shares, VanEck, and other assorted money-wizards—submitted filings to swap their cash-only Bitcoin and Ethereum ETFs for something called “in-kind” creation. Because, apparently, cash is so 2008. 💸
  • The SEC, in a rare moment of lucidity, released a 12-page “framework” (read: bureaucratic horoscope) outlining custody, disclosures, and risk. They’re also flirting with faster approvals—because nothing says “efficient market” like a 75-day wait instead of 240. ⏳
  • In-kind structures would let issuers and APs trade crypto directly, cutting costs, improving tax efficiency, and—most importantly—giving lawyers something to argue about for years. 🧑⚖️
  • If approved, U.S. crypto ETFs might finally stop embarrassing themselves in front of their cooler, global cousins. 🌍

The Great Bitcoin ETF Heist (Or, How Wall Street Learned to Stop Worrying and Love Crypto)

Late July 2025—a month best remembered for its heatwaves and financial desperation—saw five ETF providers (Ark 21Shares, Fidelity, Invesco Galaxy, VanEck, and WisdomTree) submit coordinated amendments to the SEC. Their demand? To ditch the cash-only model for something called “in-kind creation.” Because nothing says “innovation” like copying what traditional ETFs have done for decades. 📜

Under the current cash-only model (introduced in January 2024, when the SEC was still pretending to understand crypto), ETF issuers must convert everything to fiat. This, unsurprisingly, has led to higher costs, misaligned prices, and the kind of inefficiency that would make a Soviet bureaucrat blush. ☭

The in-kind model, meanwhile, would let authorized participants swap actual crypto for ETF shares—like a high-stakes game of Pokémon cards, but with more regulatory scrutiny. 🃏

The SEC’s Latest Magic Trick: Pretending to Understand Crypto

The SEC, in a shocking twist, has started to—dare we say—soften its stance on crypto ETFs. On July 7, they released a 12-page “supervisory framework” (read: bedtime story for compliance officers) outlining their expectations. The document covered custody (don’t lose the Bitcoin), disclosures (tell people you might lose the Bitcoin), and risk management (try not to lose the Bitcoin). 📑

They also proposed speeding up approvals—because nothing builds investor confidence like a regulatory stamp of approval in just 75 days instead of 240. 🚀

Bryan Armour, an ETF analyst at Morningstar, noted that the SEC is “cautious.” A generous interpretation. More likely, they’re still trying to figure out how a blockchain works. 🤔

James Seyffart of Bloomberg, ever the optimist, tweeted that the filings suggest “positive movement.” Translation: The SEC hasn’t said “no” yet. 🎉

NEW: More positive signs regarding Bitcoin & Ethereum ETFs obtaining the ability to do in-kind creation and redemption

5 different funds on CBOE filed amendments with the SEC. This indicates to me that there is positive movement and likely fine tuning happening with the SEC

— James Seyffart (@JSeyff) July 22, 2025

Bitbo, ever the cynic, suggested earlier resistance to in-kind models stemmed from SEC fears of money laundering. Because, of course, fiat has never been used for crime. 🕵️‍♂️

Deloitte noted that several ETF applications originally included in-kind mechanisms but were forced into cash-only by the SEC. Their reintroduction now suggests the SEC has either (a) learned something or (b) given up. 🏳️

Why In-Kind? Because Cash is for Peasants

The move to in-kind creation would change how Bitcoin ETFs function—from a clunky, inefficient mess to a slightly less clunky, inefficient mess. Here’s why it matters:

1. Fewer Middlemen, More Problems (Solved)

Currently, cash-based ETFs require issuers to buy/sell Bitcoin on behalf of participants, introducing delays, costs, and the kind of market friction that makes traders weep into their keyboards. ⌨️💧

In-kind models let APs swap Bitcoin directly—cutting out unnecessary steps, like a financial Marie Kondo. If it doesn’t spark joy, throw it out. 🧹

2. Tax Efficiency (Or, How to Keep the IRS at Bay)

In-kind redemptions let ETFs transfer Bitcoin instead of selling it, avoiding taxable events. This is good for investors, bad for accountants who thrive on complexity. 🧮

3. Better Arbitrage (Because Who Doesn’t Love Free Money?)

Cash-based ETFs create arbitrage delays, letting prices drift from NAV like a drunk uncle at a wedding. In-kind tightens the link, keeping ETF prices in line with Bitcoin’s spot price—or at least as close as crypto ever gets to “in line.” 📊

The Final Act: Will Crypto ETFs Ever Grow Up?

If approved, in-kind creation could make Bitcoin ETFs more palatable to institutions—assuming those institutions haven’t already moved on to the next shiny thing. 🏦

It won’t revolutionize access, but it might make existing access slightly less embarrassing. And in the world of finance, that’s practically a standing ovation. 👏

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2025-07-24 22:30