"21Shares Proposes In-Kind Bitcoin, Ethereum ETF Redemption"

21Shares has submitted a proposal to the U.S. Securities and Exchange Commission (SEC) seeking approval for in-kind creation and redemption mechanisms for its ARK 21Shares Bitcoin ETF and 21Shares Core Ethereum ETF. The proposal, filed through Cboe BZX Exchange, would allow authorized participants to directly exchange ETF shares for Bitcoin or Ethereum instead of cash.

The in-kind approach aims to enhance operational efficiency by enabling authorized participants to better match ETF supply with market demand while lowering costs. This mechanism would also provide improved liquidity and operational flexibility for institutional investors managing these funds.

The filing follows a similar request from Nasdaq for BlackRock’s iShares Bitcoin Trust, which also seeks to implement in-kind redemption. BlackRock’s ETF has emerged as the largest spot Bitcoin ETF, generating nearly $40 billion in inflows since launching in January, making it the most successful ETF launch ever recorded.

While the SEC’s initial approvals for Bitcoin and Ethereum ETFs only allowed cash-based transactions, the industry is now advocating for in-kind mechanisms, indicating an evolution in both regulatory and operational approaches to crypto ETFs. The proposed amendment, if granted approval, could establish a new standard for crypto ETF operations, potentially reducing transaction friction and increasing efficiency for institutional investors.