The U.S. Securities and Exchange Commission (SEC) has officially acknowledged in-kind redemption for BlackRock’s spot-based Ethereum exchange-traded fund (ETF).
It essentially means that the regulator is currently considering the aforementioned proposal, but there is no guarantee that it will eventually be removed.
The regulator also made a similar move with spot Bitcoin ETFs in January.
On May 13, the regulator also delayed making a decision on in-kind redemptions for BlackRock’s tremendously successful Bitcoin ETF.
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Notably, on the same day, BlackRock also filed to allow in-kind redemptions for its spot ETH ETF.
Enabling in-kind redemptions would allow the fund to give investors actual underlying assets instead of cash when they sell their shares.
The “in-kind” model is considered to be significantly more streamlined compared to the “in-cash” one, which is why the ETF products are expected to get a substantial boost in efficiency.
That said, it should be that only authorized participants will be able to perform in-kind redemptions.
Back in December 2023, on the verge of the eventual approval of spot Bitcoin ETFs, BlackRock caved to the SEC’s demands to exclude in-kind redemptions from their ETF product (the same applies to the Ether-based one as well).
Following the departure of former SEC Commissioner Gary Gensler, Commissioner Hester Peirce stated that she was open to reconsidering in-kind redemptions. She stressed that the agency would be focused on allowing issuers to design products in a way that would be most useful for investors.