In January 2024, the approval of the Bitcoin spot ETF marked a successful "beach landing" for crypto assets into the traditional financial fortress. However, the real "D-Day moment"—the large-scale landing of a "main force" that will determine the future battlefield—is quietly beginning with a seemingly mundane regulatory document. The U.S. Securities and Exchange Commission (SEC) has published general listing standards for crypto asset ETPs through exchange filings and has tacitly allowed staking yields. This series of new regulations not only paves the way for the mass listing of altcoin ETFs but may also trigger a massive supply squeeze of up to $710 billion for Bitcoin ETFs, fundamentally changing the supply-demand landscape of the crypto market.
Recently, rule change proposals (SR-CboeBZX-2025-104, etc.) submitted by Cboe BZX Exchange and Nasdaq are attempting to establish a "fast track" for the general listing standards of altcoins.
"Highway" Model: The new "general listing standards" completely change the game rules. The core is that any crypto asset whose futures contracts have been trading stably for six months in a CFTC-regulated market (such as CME or Coinbase derivatives exchange) is eligible for listing via the "fast track." The SEC's intention is to establish a scalable regulatory framework, but objectively, this has partially "devolved" the approval authority.
"Staking Yields" New Weapon: The new regulation 14.11(e)(4)(G) cleverly stipulates that as long as the ETF issuer can ensure that 85% of the assets are redeemable at any time or establish a comprehensive "liquidity risk management plan," then ETFs that include staking yields are permitted. This is equivalent to "tacitly" allowing the native yield mechanisms of the DeFi world to be packaged into Wall Street's most mainstream financial products.
Coinbase Becomes the "Chosen One": As the largest crypto exchange in the U.S., Coinbase is inadvertently pushed to the "biggest winner" throne by this new regulation due to its unparalleled ecosystem advantages. Its futures market has become the "qualification certification center" for ETFs, while staking and custody services have become "core infrastructure," and the spot market provides massive trading depth, with regulatory cooperation building a moat.
On July 29, the SEC approved the physical creation and redemption mechanism for spot Bitcoin and Ethereum exchange-traded products (ETPs), marking a significant shift in the structural framework of crypto investment tools.
Replacing Pure Cash Model: This decision replaces the pure cash model adopted by the first batch of cryptocurrency ETPs and aligns the regulatory framework for digital asset funds with existing standards for commodity ETPs like gold.
Lowering Costs and Arbitrage Thresholds: The physical mechanism allows authorized participants (APs) to directly deliver or receive the underlying assets, Bitcoin or Ethereum, eliminating the need for fund-driven market transactions and enabling participants to use existing procurement channels (such as over-the-counter trading). The result is typically lower trading costs, narrower bid-ask spreads, and enhanced net asset value (NAV) tracking.
Massive Capital Inflows: Lower costs, clearer arbitrage methods, and improved hedging tools enhance the attractiveness of this investment tool to institutional allocators. If these advantages translate into sustained net inflows, the upward pressure on spot demand for Bitcoin and Ethereum could be immense.
Can the physical creation and redemption allow Bitcoin ETFs to grow to a scale comparable to VOO (Vanguard's S&P 500 ETF, holding $714 billion)?
Tenfold Growth Potential: This requires the scale of Bitcoin ETFs to achieve a tenfold explosive growth from the current base. Currently, the largest spot cryptocurrency ETF is BlackRock's IBIT, which holds $86 billion.
Supply Squeeze: If capital inflows continue in the coming years and BTC prices keep rising, a supply squeeze is almost inevitable. At a Bitcoin price of $200,000, even without the next dollar of capital inflow, IBIT has already entered the top ten ETFs by asset size.
Institutional Capital Intensively Entering: On the capital front, institutions are still intensively entering the market. Strategy announced the purchase of 21,021 Bitcoins for about $2.46 billion, increasing its total holdings to 628,791, solidifying its leadership position in the "Bitcoin treasury." The BTC/USD trading volume during U.S. trading hours has risen to 57.3%, indicating a continued increase in the dominance of dollar zone capital in the market.
Ethereum is also in the spotlight: Glassnode data shows that the proportion of Ethereum open contract positions has risen to nearly 40%, reaching a new high since April 2023. Standard Chartered Bank analysts believe that treasury-type companies are continuously increasing their ETH holdings, reflecting an elevated strategic position in asset allocation. If capital inflows remain strong, ETH is expected to break through the $4,000 mark.
The SEC's regulatory reforms have effectively modernized the infrastructure surrounding crypto ETPs.
Regulatory Framework: By allowing physical creation and redemption, the SEC has created a pathway for demand to flow more effectively into digital assets, thereby reducing friction without changing the fundamental principles: liquidity drives the market, while structure determines how much liquidity can enter the chain.
Industry Outlook: Just as "D-Day" marked a turning point in the European theater of World War II, the introduction of the "general listing standards" also marks a turning point for crypto assets to integrate into mainstream finance. It heralds the arrival of a new era: an era driven by clear rules and scalable replication of altcoin ETFs.
The SEC's new regulations tacitly allow staking yields and approve the physical creation and redemption mechanism, laying the foundation for explosive growth in crypto asset ETFs. Bitcoin ETFs are expected to face a massive supply squeeze of up to $710 billion, while the mass listing of altcoin ETFs is also imminent. These regulatory reforms not only lower the barriers for institutional entry and enhance market liquidity but also push cryptocurrencies to the center of mainstream finance. The once "disorderly" crypto industry is entering a new phase characterized by clear rules, compliant operations, and higher entry thresholds, signaling that the crypto market is about to witness a true "D-Day moment."
Related: Cboe and NYSE Arca apply for SEC rule changes to simplify the listing process for crypto ETFs.
Original: “SEC's New Rule Allows Staking Yields, Bitcoin (BTC) ETF May Face $710 Billion Supply Squeeze”
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