"21Shares Proposes In-Kind Redemption for Bitcoin, Ethereum ETFs"

21Shares, a leading provider of cryptocurrency exchange-traded funds (ETFs), 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, aims to enhance operational efficiency and improve liquidity for institutional investors managing these funds.

The in-kind approach would allow authorized participants to directly exchange ETF shares for Bitcoin or Ethereum, rather than cash. This mechanism is designed to better match ETF supply with market demand, lower costs, and provide improved operational flexibility for institutional investors. 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. 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.