Five issuers; 21Shares, Fidelity, Franklin Templeton, Galaxy, and WisdomTree, file amendments for in-kind redemptions on Bitcoin and Ethereum ETFs.
Five issuers have submitted amendment filings to the US Securities and Exchange Commission (SEC) to obtain approval for in-kind features on their crypto exchange-traded funds (ETFs). James Seyffart contends that a crypto ETF will soon receive regulatory approval for in-kind creation and redemptions, even though the SEC has delayed issuing its approvals.
An expert predicts a crypto ETF will be approved for an in-kind feature
According to James Seyffart, a Bloomberg analyst, the US Securities and Exchange Commission (SEC) may permit Bitcoin and Ethereum exchange-traded funds (ETFs) to provide in-kind redemptions and creations. Seyffart expressed his opinions in an X post, referencing a surge in new amendment filings with the securities regulator.
Amendments have been submitted by five funds on CBOE to obtain the SEC’s approval to incorporate the features into their offerings. Ark 21, VanEck, Invesco, WisdomTree, and Fidelity are the issuers following the filing numbers.
Seyffart characterizes the new filings as “positive signs” of a shift in the SEC’s posture on in-kind creation and redemptions. In April, the SEC postponed VanEck’s application for in-kind features, and BlackRock submitted its application.
“5 different funds on CBOE filed amendments with the SEC,” said Seyffart. “This indicates to me that there is positve movement and likely fine tuning happening with the SEC.”
Typically, a crypto ETF can exchange assets directly without relying on currency through in-kind creation and redemption. Investors can circumvent capital gains taxes by obtaining consent from the SEC, as crypto assets are not sold. Seyffart emphasizes the “efficiency” benefits of ETFs.
This amendment will not apply to retail
The introduction of in-kind features to the crypto ETFs will not apply to retail traders, as Seyffart observes in his X post. According to Seyffart, only Authorized Participants, such as “Big Wall Street firms and market makers,” are permitted to exchange shares of their ETFs for the underlying asset if they are approved.
“This will make current and future crypto ETFs more efficient,” Seyffart added. “But the vast majority of people won’t even see a difference because the products on the market now already trade extremely efficiently.”
In the interim, the Securities and Exchange Commission’s Crypto Task Force is conducting a series of roundtable discussions with prominent industry figures, indicating that the agency is becoming more favorable to cryptocurrencies under the leadership of Paul Atkins. Additionally, Ethereum ETF daily inflows have reached a record high of $717 million due to a softerening stance.
In addition to the numerous amendments, numerous issuers are submitting applications for staking features on their crypto ETFs. BlackRock has submitted a request for staking in its Ethereum ETF following the introduction of the Rex-Osprey Solana ETF with staking functionality.