SEC Postpones Fidelity's In-Kind Redemption Feature

Fidelity is among several major asset managers that have filed to allow in-kind redemptions in their spot Bitcoin and Ethereum exchange-traded funds (ETFs).

The U.S. Securities and Exchange Commission (SEC) has postponed its verdict on Fidelity’s proposals to offer in-kind redemptions for both Bitcoin and Ethereum exchange-traded funds (ETFs).

The regulator is currently considering several applications for spot cryptocurrency ETFs from major asset managers, including proposals for new features that could enhance the efficiency and operation of the ETFs.

Among the pending proposals are requests for in-kind redemption to be included in the ETFs. These mechanisms, which are commonly used in traditional ETFs, allow authorized participants to exchange ETF shares directly for the underlying crypto assets, instead of cash, further reducing trading costs and potential tax implications.

While the SEC recently approved a similar request from BlackRock for its spot Ethereum ETF, it has decided to defer Fidelity’s proposals for both Bitcoin and Ethereum ETFs, without providing a timeframe for when a final decision might be made.

The agency is yet to rule on several other proposals for in-kind redemptions, which were submitted earlier this year. In April, the SEC also postponed rulings on in-kind redemption proposals from WisdomTree for its Bitcoin Fund (BTCW) and Ethereum Fund (ETHW), as well as VanEck’s Bitcoin Fund (BITB).