Cboe BZX Exchange, on behalf of Inveso Galaxy, has submitted a rule-change proposal with the U.S. Securities and Exchange Commission. The proposed change allows for creations and redemptions in kind of its Bitcoin ETF and Ethereum ETF.
Bypassing cash, in-kind redemptions/creations allow the exchange of the ETF assets directly (Bitcoins/Ethereum) to ETF shares.
By using this method, participants do not need to sell their cryptos to generate shares. This reduces the spread between the ask and bid price as well as broker fees.
Published on Thursday, the proposal pushes boundaries for crypto ETFs, opening up new avenues to investors. Bitcoin BTC is a currency that can be used to buy goods and services. Ethereum The assets can be held in ETH without the physical possession of them.
While the SEC is reviewing Cboe’s proposed rule changes, a comment period was opened to allow stakeholders to express their opinions before a decision is finalized.
Authorized participants—institutions involved in the creation and redemption process—will be eligible to use the in-kind transaction model, says the filing.
When purchasing ETF shares or redeeming them, individual investors must still use the cash model.
BlackRock recently applied for approval to allow in-kind redemptions.
A tweet that is related to the topic. Bloomberg ETF Analyst James Seyffart stated in January of this year that redemptions and in-kind creations would “streamline the ETF Market”.
Wow. There are way too many questions, and the information is quite deep. So i'll keep it high level and answer "What does this mean?"
It’s not much of a deal for retail investors. Mostly what it means is that ETFs should trade even more efficiently than they already do… pic.twitter.com/LWYsKmo5sH
— James Seyffart (@JSeyff) January 24, 2025
The analyst explained there would be fewer parties and steps involved, sharing a picture BlackRock used in November 2023 SEC meetings to promote in-kind Bitcoin ETF transactions.
Seyffart stated that “in my opinion, the ETFs would have done this right away but the Dem SEC Commissioners opposed it.”
Bitcoin ETFs face challenges
Invesco Galaxy Bitcoin ETF was approved by the SEC in January of last year, becoming one of the very first Bitcoin spot ETFs listed on an American exchange.
In May, last year the SEC approved the Invesco Galaxy Ethereum ETF after approving its Bitcoin equivalent.
It is similar to the Bitcoin ETF in that it uses Ethereum as its underlying asset, and shares can be traded at a regulated market.
Bitcoin ETFs and Ethereum ETFS have both faced recent challenges.
Data from UK investment management company Farside Investors shows that Bitcoin ETFs have experienced significant outflows of $371m on Tuesday. It was the seventh straight day with withdrawals.
Ethereum ETFs also saw outflows, totaling $21,57 million. This extended their five-day streak.
