The SEC is on a roll, facilitating new regulations to permit full trading of crypto assets and derivatives of crypto assets.

An ETP is an “exchange traded product,” a derivative that tracks changes in value of one or more underlying crypto assets.  Until now, SEC rules required that upon sale of such ETPs, settlement (payment) had to be in cash, eg dollars.  The result was that you had to cash out on an exchange.

New SEC rules now permit proceeds of the sale of crypto ETPs to be paid in in-kind assets (“in-kind creations and redemptions”).  Prior policy for cash only transaction reflected the conservative approach of the Democratic-controlled Commission which in turn reflected the then-Administration’s queasiness about crypto in general; it was bad enough crypto existed, but let’s not compound the sin by having the entire transaction avoid the use of real money entirely.  The current Administration of course is pro-crypto and its surrogate regulators are thusly aligned.

The SEC also is considering whether to approve the operation of a national exchange to trade a couple of large-cap crypto ETPs; this, part of an effort to treat crypto as any other securities class.  Volatility risk aside, seems to me that markets in crypto and its derivatives will be treated much like investment in securities generally, or perhaps in currencies issued by national governments; given the state of today’s world, who can say that crypto will be more volatile than common equities or currencies in the future.