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

Good Morning, Asia. Here's what's making information in the markets:

Welcome to Asia Morning Briefing, a day by day abstract of prime tales throughout U.S. hours and an summary of market strikes and evaluation. For an in depth overview of U.S. markets, see CoinDesk's Crypto Daybook Americas.

On Wednesday in the U.S., the Securities and Exchange Commission introduced that traders are actually allowed to do in-kind redemptions for bitcoin and ether exchange-traded funds (ETFs).

The resolution lets institutional merchants create and redeem ETF shares immediately in BTC or ETH, enhancing effectivity by avoiding fiat conversions.

But in Hong Kong, this isn't something new. In late 2023, throughout the early days of the regulatory course of to carry crypto ETFs to the market (they launched in April 2024), the Securities and Futures Commission – town's markets regulator – talked about in a round that in-kind redemptions can be allowed.

Part of the rationale why they have been allowed was a technical one: ETF issuers have been required to accomplice with licensed native crypto exchanges and use custody options. This wasn't the case in Ontario, Canada, which had crypto ETFs first, nor the U.S. In Hong Kong there wasn't the identical debate concerning the standing of Ether as a safety as there was in the U.S.

In distinction, U.S. regulators wrestled with considerations over custody, anti-money laundering dangers, and potential market manipulation.

While the SEC by no means explicitly banned in-kind redemptions, ETF sponsors have been required to take away them from early filings. The Commission favored a cash-only method as a cautious first step, citing untested operational processes and uncertainty over find out how to securely settle giant crypto transfers.

That stance wasn’t with out inside pushback. SEC Commissioner Mark Uyeda publicly criticized the company’s method throughout the January 2024 approval of spot bitcoin ETFs.

He identified that commodity-based ETFs, like these backed by gold, routinely use in-kind redemptions and questioned why crypto was being handled in another way.

Uyeda argued that the SEC failed to elucidate why it thought of cash-only redemptions “non-novel,” regardless of the clear deviation from normal ETF apply, and warned that the shortage of reasoning set a troubling precedent.

The episode highlights how Hong Kong’s regulator moved with higher readability and cohesion from the beginning because it introduced these merchandise to market.

By enabling in-kind redemptions early on, and pairing them with strict licensing and custody necessities, the SFC prevented the interior contradictions and coverage drift that outlined the U.S. rollout.

However, there's going to be one facet impact from all of this: monitoring flows.

Crypto information aggregator SoSoWorth, which supplies day by day movement updates for crypto ETFs, warns that “subscriptions of physical bitcoin do not generate cash inflows for the [ETFs], so they cannot be simply counted in daily net inflow statistics.”

They've tried to create strategies and fashions to work round this, however say they’ve been unsuccessful thus far.

So until ETF issuers in the U.S. publish day by day movement in money and crypto, monitoring this metric goes to be a problem. And it's an essential one to trace, because it reveals investor sentiment for the asset class.

Market Movements

BTC: Bitcoin is buying and selling above $117,500 after a modest rebound, however momentum stays weak as ETF outflows persist, whales take revenue close to $118K, and macro headwinds, together with a agency greenback and hawkish Fed expectations, proceed to restrict upside.

ETH: ETH is buying and selling above $3,700. “Ethereum has proven in parallel with BTC since its inception to be the second most battle-tested network, and very likely institutions now see Ether the token as a formidable asymmetric bet alongside bitcoin,” stated March Zheng, General Partner of Bizantine Capital, in a observe to CoinDesk.

Gold: Gold rebounded to $3,334 on Tuesday, snapping a four-day shedding streak forward of the Fed assembly, as merchants priced in regular charges regardless of weak U.S. job information

Nikkei 225: Asia-Pacific markets opened blended as U.S. Commerce Secretary Howard Lutnick confirmed Trump’s Friday tariff deadline will proceed as deliberate, with Japan’s Nikkei 225 flat on the open.

S&P 500: U.S. shares closed decrease Tuesday, with the S&P 500 ending a six-day report streak, as traders weighed earnings, financial information, and the upcoming Fed fee resolution.

Elsewhere in Crypto:

• Tornado Cash Developer Roman Storm Will Not Take the Stand, Lawyers Say (CoinDesk)
• Cornell Tech Professor Warns AI Agents And Crypto Spell Trouble (Bloomberg)
• Sen. Lummis introduces invoice requiring Fannie Mae and Freddie Mac to contemplate crypto as an asset for mortgages (The Block)