Do I receive cash or the underlying asset when I redeem?

Usually cash, in dollars or a stablecoin, unless the documents provide otherwise. Tokenized Treasury funds generally pay dollars or USDC. Some products let eligible holders convert to the underlying asset: Backed offers in-kind conversion between its tokens and shares through a brokerage provider. Some reserve the right to pay you in kind: Securitize's ACRED feeder can withhold redemption proceeds for reserves or compliance and pay in kind, including in stablecoins, at the directors' discretion.

Is a stablecoin payment a cash redemption?

Economically close, legally not the same. A stablecoin is a claim on its issuer, so being paid in USDC leaves you exposed to that issuer until you convert to dollars. Some documents treat stablecoin payment as payment in kind. See stablecoin settlement risk.

Can a registered fund pay redemptions in kind?

Yes, in general. A registered open-end fund may pay in kind, but a fund that elects under Rule 18f-1 commits to pay each shareholder in cash up to the lesser of $250,000 or 1% of its net assets during any 90-day period. Exchange-traded funds routinely create and redeem shares in kind with authorized participants, not with retail holders.

What does an in-kind redemption cost me?

You receive assets rather than cash, so you bear the cost and timing of selling them if you need cash, and you need an account able to hold them. For tax purposes, a redemption is a sale of your fund units whether paid in cash or in kind; your basis in the assets received is generally their value at receipt.

Cash vs In-Kind Redemption

Tokenized Real-World Assets

Definition

A cash redemption pays the redeeming holder money: dollars by wire, or, in many tokenized products, a stablecoin such as USDC. An in-kind redemption pays the holder with assets instead: a pro rata slice of the fund's securities, the specific share or bond a token represents, or a physical asset such as metal. Who chooses is set by the documents. Some products give the holder the choice; many give the issuer the right to pay in kind in some circumstances; some offer in-kind conversion only through a broker. In-kind delivery requires the holder to have somewhere to receive the asset, such as a brokerage account for shares, and shifts the work and cost of selling it to the holder, while letting the fund avoid selling assets into a weak market.

Why it matters

The settlement asset decides what a holder actually walks away with. A tokenized fund that pays in dollars ends the holder's exposure on payment; one that pays in a stablecoin leaves the holder exposed to the stablecoin's issuer until conversion; one that can pay in kind can hand the holder illiquid assets in exactly the conditions when cash is most wanted. In-kind rights are often written as issuer discretion, used rarely and in stress, so they are easy to overlook in normal times. AltStreet reads every tokenized product's redemption section for the settlement asset, who chooses it, and the circumstances in which the issuer can substitute assets for cash.

Common misconceptions

•A redemption right is not a right to cash unless the documents say so. Many allow payment in kind.
•Stablecoin proceeds are not dollars. They are a claim on the stablecoin's issuer until converted.
•In-kind conversion is not available to everyone. It usually requires eligibility and an account able to hold the asset.
•Paying in kind does not avoid tax for the holder. The holder's redemption is still a sale.
•A token backed one-for-one by a share does not entitle every holder to that share. Conversion terms decide.

Technical details

Settlement assets compared

Dollars by wire: final when credited by the bank; slower, limited to banking days.

Stablecoin: fast and available at any hour; adds the stablecoin issuer's risk and a conversion step.

Securities in kind: delivered to a brokerage or custody account; the holder decides when to sell.

Physical assets: some commodity tokens offer delivery of metal, typically with minimum sizes, fees and logistics.

Other fund units or notes: some structures can exchange one security for another in a restructuring.

Examples from AltStreet's reviews

Superstate USTB: redemptions in dollars by wire or in USDC; instant USDC redemption through Protocol Redeem when available.

Ondo OUSG: instant redemption in USDC; standard redemption in dollars.

Securitize ACRED: redemption proceeds can be withheld for reserves or regulatory compliance and paid in kind, including digital stablecoins, at the directors' sole discretion.

Backed: in-kind conversion between shares and tokens (xPort) through a brokerage provider, Alpaca, for eligible users.

When issuers choose in-kind payment

Large redemptions that would force the fund to sell assets at poor prices.

Illiquid holdings that cannot be sold within the redemption period.

Wind-downs, where distributing assets is fairer than a forced sale.

Registered fund limits: Rule 18f-1 electing funds must pay cash up to the lesser of $250,000 or 1% of net assets per shareholder in any 90 days.

Checklist

What is the default settlement asset, and can the holder choose?

Can the issuer pay in kind, and in what circumstances?

What account or wallet is needed to receive each settlement asset?

What does conversion to dollars cost, and how long does it take?

How is the redemption taxed, and how is basis set for assets received?

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

Do I receive cash or the underlying asset when I redeem?: Usually cash, in dollars or a stablecoin, unless the documents provide otherwise. Tokenized Treasury funds generally pay dollars or USDC. Some products let eligible holders convert to the underlying asset: Backed offers in-kind conversion between its tokens and shares through a brokerage provider. Some reserve the right to pay you in kind: Securitize's ACRED feeder can withhold redemption proceeds for reserves or compliance and pay in kind, including in stablecoins, at the directors' discretion.
Is a stablecoin payment a cash redemption?: Economically close, legally not the same. A stablecoin is a claim on its issuer, so being paid in USDC leaves you exposed to that issuer until you convert to dollars. Some documents treat stablecoin payment as payment in kind. See stablecoin settlement risk.
Can a registered fund pay redemptions in kind?: Yes, in general. A registered open-end fund may pay in kind, but a fund that elects under Rule 18f-1 commits to pay each shareholder in cash up to the lesser of $250,000 or 1% of its net assets during any 90-day period. Exchange-traded funds routinely create and redeem shares in kind with authorized participants, not with retail holders.
What does an in-kind redemption cost me?: You receive assets rather than cash, so you bear the cost and timing of selling them if you need cash, and you need an account able to hold them. For tax purposes, a redemption is a sale of your fund units whether paid in cash or in kind; your basis in the assets received is generally their value at receipt.