I agree that in kind redemptions would be the next level. It would ease the workflow and cut one more speed bump/intermediary - I'm thinking about the daily settling business in particular. Also, it may be an additional incentive not to play games with fire (or corn), because when a customer's redemption must be liquidated, the issuers - say, Blackrock - are going to need bitcoin, not fiat.

However, I am not so convinced that much would actually change. Investors who turn to ETFs rather than the hard underlying (that's our king daddy), probably do so exactly not to be bothered with magical internet money on their balance sheet or household finances. When they eventually sell their ETFs, I'm betting fiat is what they want. If there were a choice between in kind (btc) or fiat redemption, my gut tells me an overwhelming majority would go for fiat. If not, why get the ETF rather than raw corn in the first place?