Crypto Ownership and ETFs Expected to Converge by 2025

2024 witnessed the launch of bitcoin and ether spot exchange-traded funds (ETFs), leading to rapid growth, with global crypto ETPs surpassing $134 billion in assets under management by November 2024.
The SEC's current cash-only redemption policy for ETFs is expected to change in 2025, allowing in-kind redemptions. BlackRock has filed for a rule change to facilitate this.
In-kind redemptions will enable investors to move cryptocurrency holdings into ETFs without immediate tax implications, enhancing liquidity and access to traditional financial services.
Traditional investors can convert ETF shares into direct crypto holdings, gaining easier access to decentralized finance (DeFi) products.
Withdrawal of Staff Accounting Bulletin No. 21 will encourage banks and brokerages to develop crypto-related financial products, evidenced by Coinbase launching a bitcoin-backed lending product.
Investors are showing interest in self-custody solutions to manage assets independently, emphasizing the need for secure options in the evolving market.
Anticipated regulatory changes will further blur lines between traditional finance and DeFi, improving interaction with crypto-native platforms.
Convergence of TradFi and DeFi could increase market liquidity and create interconnected investment opportunities.

On-chain ownership offers 24/7 access and flexibility compared to traditional ETFs, allowing for collateral use and participation in decentralized ecosystems.
Direct custody of crypto assets enables quick liquidity and control over investments, contrasting with brokerage limitations.
Future AI agents may prefer tokenized assets on-chain due to seamless automation and elimination of intermediaries.

President Trump signed a crypto executive order aimed at establishing a federal agenda for U.S. digital assets.
The Arizona Senate approved a bill to create a strategic Bitcoin reserve.
The U.S. Senate formed a Subcommittee on Digital Assets, chaired by Senator Cynthia Lummis, advocating for cryptocurrency interests.