BlackRock has filed an amendment to its S-1 registration statement for the iShares Ethereum Trust (ETHA), seeking to implement in-kind creation and redemption capabilities. It was submitted on May 9, 2025, and would allow investors to directly exchange ETF shares for Ethereum tokens rather than using cash as an intermediary.
The recent filing aims to align its Ethereum ETF operations more closely with traditional ETFs by enabling the direct exchange of the underlying asset. It would enable authorized participants to swap ETF shares directly for ETH during creation and redemption processes, bypassing the current cash-only system.
It demonstrates the firm’s consistent strategy across its digital asset offerings by aligning with a similar application that BlackRock made for its Bitcoin spot ETF three months earlier.
Lower Costs, Tax Benefits, and Better ETH Price Tracking
Unlike the current cash-based model, it could significantly reduce costs and market friction by eliminating the need to convert cryptocurrency to fiat currency during transactions.
Additionally, it would enable authorized participants to avoid capital gains taxes since they wouldn’t need to sell ETH for cash during the redemption process.
Meanwhile, it also improves ETH price tracking while reducing trading fees, creating a more efficient overall investment vehicle. This enhances liquidity in the crypto ETF sector by streamlining the transaction process.
SEC Yet to Approve In-Kind Redemption for Crypto ETFs
The application represents the first attempt to implement in-kind creation/redemption for Ethereum ETFs. However, other issuers, including Invesco Galaxy, VanEck, WisdomTree, and 21Shares, have followed suit with similar amendments.
Previously, the SEC has delayed decisions on similar requests and has not approved in-kind redemption models for crypto ETFs. Bloomberg analyst James Seyffart expects the final deadline for the SEC’s decision on BlackRock’s proposal to be around November 10, 2025.
The push for in-kind redemption follows BlackRock’s recent discussions with the SEC’s Crypto Task Force regarding staking, tokenization, and options on crypto ETPs. These discussions highlighted the asset manager’s active role in shaping the regulatory framework for digital assets.
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