Bitcoin, Ethereum ETF Issuers Likely to Get SEC Approval for In-Kind Redemptions: Analyst

In-kind redemptions appear more likely to become part of spot Bitcoin and Ethereum exchange-traded funds, Bloomberg ETF analyst James Seyffart said Tuesday, citing a flurry of filings from issuers to the U.S. Securities and Exchange Commission. 

Five issuers with Bitcoin and Ethereum ETFs on the CBOE have recently filed amendments to their prospectuses, Seyffart said in a social media post on Tuesday. They include Invesco Galaxy, Ark 21Shares, VanEck, WisdomTree, and Fidelity.  

The analyst noted that the filings might signal issuers are making inroads with federal regulators over their requests to add in-kind redemptions to crypto-based funds.

“More positive signs regarding Bitcoin and Ethereum ETFs obtaining the ability to do in-kind creation and redemption,” Seyffart said in the post, referring to the spate of filings. “This indicates to me that there is positive movement and likely fine-tuning happening with the SEC.”

The analyst’s comments come as federal regulators continue to raise security and logistical concerns over in-kind redemptions for digital asset-based funds. Those concerns have led the SEC to continue to punt on its decisions to approve or deny several requests to add the feature to funds tracking the prices of blue-chip cryptocurrencies.

In-kind redemptions enable investors to redeem ETF shares for a fund’s underlying tokens to avoid certain tax liabilities. The feature is popular with investors, but regulators are concerned the process is complex and could pose security concerns in crypto-based funds. 

On July 16, the SEC delayed its deadline to weigh in on an in-kind redemptions for the Bitwise Bitcoin ETF Trust and Bitwise Ethereum ETF. Earlier this month, the regulator postponed its decision on in-kind redemptions for BlackRock’s iShares Ethereum Trust (ETHA) to August 26, a filing shows. 

The SEC has received a slew of crypto-related ETF proposals from asset managers since pro-crypto President Donald Trump came into office last January and vowed to improve regulatory clarity for the crypto industry. But while the SEC’s ranks have grown increasingly crypto-friendly under the Trump administration, it has still moved slowly on many digital asset-based ETF applications. 

In May, the SEC pushed back its deadline to approve or deny a group of spot Solana ETFs. And a few weeks ago, the federal agency delayed its decision on allowing Bitwise’s spot Ethereum ETF to add staking, another widely requested feature for crypto funds.